Josh Zegen

Are rate cuts the silver bullet the industry has been waiting for to solve all woes? 

Yes. It’s really the tip of the spear. Post-GFC, cap rates and CRE investment returns have become directly correlated to Treasurys — in some asset classes more than others. It’s the sauce behind “relative value” for CRE as compared to other investment strategies. Until short-term rates return to “acceptable” levels that attract investors, we’ll continue to be on the outside looking in regarding new investment activity. 

How long will nonbank lenders continue to take increased market share?

Indefinitely, albeit at a slower pace year-over-year. It’s a rare event to see the majority of the nonsecuritized CRE banking sector on the sidelines from the second half of 2022 through year-to-date 2024. Alternative lenders have really had the marketplace to themselves. I don’t see alternative lenders giving that territory back, but we may not see market share shift as quickly year-over-year going forward as the Fed does lower rates (at some point) and bank balance sheets re-enter the marketplace in some format. 

How does distress continue to play out in 2025, and how can lenders best protect themselves?

Liquidity comes at a premium — equal parts debt and equity. We’ll continue to see distress play out whereby equity and debt participants run out of it. That is where you’ll see distress and/or consolidation on both sides. Lenders can protect themselves by being hypervigilant in asset management to create liquidity for themselves and their clients. 

Are you still as enthusiastic about multifamily as you were three years ago?

Directionally bullish on all things residential — build-to-rent, single-family rental, multifamily, student housing and for-sale. There is going to be limited new supply delivering over the next 24 to 48 months due to construction starts slowing. We are particularly bullish on the middle-income for-sale segment. Folks are fed up with paying rental rate increases year-over-year and want to become owners.

Have you taken any keys back this year? Wanna talk about it?

Yes — it’s part of the business. We’ve been doing this for 20 years. It comes with the territory of being a transitional, value-creation lender. If we want to be an all-cycle franchise, we have to be ready for a market correction. We have been, and will be, prepared across the board — investments, capital markets, asset management and development. When we lend money, it’s ultimately equal parts real estate and sponsor. Both have experienced tremendous friction as interest rates have dried out liquidity across the board. That being said, we have almost zero exposure to office and life sciences, which is where we continue to see little to no liquidity in debt or equity. 

Tell us about a deal you’re especially proud of this past year.

Madison originated a $400 million construction loan for The Residences at Six Fisher Island near Miami. The development will be the first newly built property on the island since 2019, and it’s a testament to Madison’s ability to serve as a single source of financing throughout the life cycle of a development. We also greatly appreciate our relationship with Related Group and BH Group.

Lightning Round:

Will interest rates be below or above 4 percent on July 1, 2025? 

Yes, short-term rates (less than three years — SOFR and Treasurys) will be below 4 percent.

How many days are you in the office today?

Five.

Pick a movie remake: “Beetlejuice” or “Twisters”?

Neither. Both classics.

Modify or foreclose?

Modify.

 Pref equity or mezz?

Whole loan (mortgage plus mezz).

Class B office: Tear down and start over, or convert?

75 percent tear down, 25 percent convert.