release edition [067]

read time [8 minutes]

Welcome to The Multifamily Download, a weekly newsletter where I provide institutional insights to help you build an exceptional Multifamily career.

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Today at a Glance:

• Event Recap: The Missing Middle
• Debt: Is The Future Here?
• Weekly Listen: PassivePockets

The Missing Middle

I just got back from BOND Multi in Anaheim, where I delivered a 60-minute talk to a room full of architects, developers, and product manufacturers.

The title of my presentation was "The Missing Middle: What It Takes to Design, Build, and Sell in the 80–200 Unit Segment", and today I'd like to share a few of the frameworks that I presented to the audience in case they're helpful.

When you hear "The Missing Middle," you may think of Daniel Parolek's 2010 housing typology work. He focused on the housing-code Missing Middle, including duplexes, triplexes, fourplexes, and cottage courts.

That version is real, but it represents only about 5% of multifamily development today, per NAHB.

The Missing Middle I presented on is the one I spend my days underwriting.

It lives on balance sheets, not inside of the zoning code.

It's ~80 to 200 unit properties that sit in the structural gap between small private operators and institutional capital.

Three gaps converge

Mid-sized multifamily is structurally under-capitalized for three reasons, and when all three converge on a single deal, the risk-adjusted returns are better than anywhere else in the sector.

1. The unit count gap. 80 to 200 unit properties are generally too large for most private investors, and too small for the institutional allocator to justify deploying capital efficiently.

2. The capital gap. A deal in this range typically needs $5M-$15M of equity. Too much for most individual investors, and too small for most institutions. There are very few capital sources built for this check size.

3. The complexity gap. These deals have real operational demands including the combination of a hands-on business plan execution along with institutional expertise.

But the fee income at this lower price point of $20M-$35M doesn't cover institutional overhead, which means most large platforms won't touch these middle market assets.

The result is a segment where institutional capital is absent at entry, but private capital is deep at exit. That's the arbitrage.

The inefficiency is the opportunity.

3 buyer archetypes

This middle market is served by three distinct private-capital buyer archetypes, each with a different hold period and a different reason to buy.

1/ The Renovator.

The value-add operator on a 3 to 5 year hold.

They underwrite to reposition, push NOI, and exit.

They want basis below replacement cost and a clear value-creation story.

2/ The Steward.

The long-hold Class A operator on a 7 to 10 year hold.

They underwrite for durable NOI and stabilized cash flow.

They want functional amenitization, agency debt compatibility, and a market that holds up over a full cycle.

3/ The Legacy Holder.

The 1031 exchange buyer, the family office, the patient capital on a 20 to 30 plus year hold.

They underwrite for irreplaceable location and long-duration yield.

They want clean operations and predictability.

A well-designed mid-sized deal is attractive to all three archetypes, which maximizes demand and the terminal value.

It's the rare segment of the Multifamily sector where developers can exit into a deeper, more resilient buyer pool than most realize.

2 Key Filters

Every deal I underwrite runs through two filters, and they answer two different questions.

Filter 1: Risk mitigation.

Can I preserve capital if the thesis doesn't play out?

This is where basis versus replacement cost matters, and where the 5-dimension market screen lives.

The five dimensions are supply pipeline, demand absorption, job diversification, wage trajectory, and legislative environment.

I wrote about the Blue vs. Red market thesis back in TMD 039, which was really a two-dimension version of this same instinct. The 5-dimension screen is the more robust screening tool.

Every market looks good on one or two of these, but the best markets are solid on all five.

Buying below replacement cost in a market that passes all five is the closest thing to a structural margin of safety I know.

Filter 2: NOI growth.

Can I drive income meaningfully higher than the seller did?

This is where the dual customer framework lives. Most developers design for one customer, the renter.

The best mid-sized projects design for two, the renter AND the next owner.

That means amenitizing as much as possible rather than as little as possible.

Greystar's 2025 Design Survey (137,000 respondents) is clear that amenities drive lease-up velocity and exit pricing.

Summary

The Missing Middle isn't a consolation prize for sponsors who couldn't land a 500-unit deal. It's a distinct asset class with its own playbook, and it rewards diligent pursuit, rigorous underwriting, and an honest assessment of sponsor capacity.

Morrell Park, the 160-unit Henderson, Nevada acquisition we closed in late 2025 as part of our three-property HUD portfolio, is a real-world example of what happens when all three gaps converge, all three archetypes are in the exit pool, and both filters say yes. More on Morrell Park in a future edition.

Until then, the question I'll leave you with is the one I left the BOND audience with:

"Are you only designing for your renter, or are you designing for your next owner too?"

If you'd like my full presentation, you can get it for free here.

The Future of Debt

Debt is the part of a multifamily transaction that has changed least over the last twenty years, and I think that's about to start shifting in a way that will benefit borrowers, brokers, and lenders together rather than at one another's expense.

Most of the rest of the deal cycle has already been streamlined.

Acquisitions have moved online, OMs are templated, underwriting models are templated, deal rooms are digital, and even equity raising has been compressed by syndication tech and AI-assisted workflows.

But the way most sponsors actually source debt hasn't changed, with a relationship-driven set of phone calls anchored by a broker who knows ten or fifteen lenders well and quotes the deal to the handful most likely to bite.

That model worked when capital markets moved slowly.

It doesn't work as well in 2026, when lender appetite shifts in weeks rather than quarters, and the universe of lenders willing to consider any given deal can climb into the hundreds or thousands.

My opinion is that debt will follow the same path that most other CRE services have followed, which is to become more streamlined, more efficient, and partially self-serve.

To be clear, I don't think that means brokers go away.

It means a self-serve layer eventually sits on top of the existing relationship layer, and the borrowers and brokers who learn to use both will be better off than the ones who choose between the two.

I want to be careful with this framing because it's a place where the conversation often gets cast as a fight, and I don't see it that way. In fact, none of those framings reflect what I'm seeing in practice.

Relationships and platforms aren't substitutes for one another, but instead they're different layers serving different jobs.

The relationship layer continues to do what it has always done well, which is structuring complex transactions, navigating credit committees, and pulling deals across the finish line when a borrower needs a real advocate.

The platform layer adds something the relationship layer can't deliver at scale, which is a complete and current picture of the entire lender universe with an acute attention to detail thanks to technology.

Many sponsors are starting to use both in their debt sourcing process, and not because their debt broker is failing them, but because the platform layer makes the broker, the borrower, and the lender all more effective in their respective roles.

In practice, that self-serve layer is being used in three ways:

1. Sponsors can run a full debt process themselves for particularly straightforward stabilized agency executions where the lender universe is fairly narrow and the required diligence and documentation is relatively predictable.

2. Sponsors are keeping their broker honest by canvassing the broader market in parallel, which doesn't replace the broker so much as to ensure the borrower is seeing the full set of options prior to term sheet negotiations.

3. And finally, perhaps the most under appreciated way is by brokers themselves. Many are using these platforms to identify the most viable lenders for a given project to compress the parts of their job that don't require judgment or client relationship management so they can spend more time on the parts that do.

What I find compelling about Lev's positioning as this self-serve layer in the debt execution process is that the company itself made the same philosophical pivot I'm describing. Their founder has been public about it.

Their original goal was to replace brokers, however his current view, in his words, is that "brokers are a very important part of the transaction industry and there's a segment that will always need them."

That's the right read on where the market is actually going. The future of debt isn't broker or platform, but it's both, working together, with the borrower as the beneficiary.

The Lev platform spans roughly 7,000 lenders ranked by current appetite based on real deal activity, which is the kind of data set that is difficult to replicate inside a traditional brokerage environment.

Sponsors are using Lev to run financings or to canvass the market alongside their broker, and an increasingly large group of debt brokers are using it to do exactly what I described in the third use case, which is to identify the right lenders for their clients more efficiently without giving up the fee they've earned through years of relationship building.

The point is this: Every service layer in the Multifamily Real Estate ecosystem will eventually be streamlined by software.

To this point, the debt process has been the slowest to change because the relationships matter more here than almost anywhere else in the deal execution process. Debt is, after all, the largest percentage of most capital stacks.

The next decade is likely to belong to the sponsors and brokers who treat technology not as a competitor to relationships but as a tool that makes their relationships more valuable.

The borrowers and brokers who win will be the ones using both layers, and the platforms that win will be the ones (like Lev) that build themselves to support all sides of the table rather than choosing one over the other.

I envision the future of debt becoming both more efficient and more collaborative.

What do you think?

Weekly Listen

This week's listen is Episode 266 of PassivePockets with Chris Lopez and Paul Shannon.

Chris and Paul cover the bifurcated multifamily market in detail, from where rents are recovering to how the maturity wall is forcing motivated sellers into the market, and what LPs should be asking sponsors about refinances in a 6-7% rate world.

This episode pairs naturally with this week's newsletter as their distress and maturity wall discussion is contributing towards the Future of Debt thesis, and the LP lens reinforces why deep, layered buyer pools matter for mid-sized exits.

You can listen to the full episode here.

Wrap Up

That's it for today. I hope you found this edition of The Multifamily Download insightful.

Two big ideas this week, both sitting at the same intersection of where capital meets execution.

If this issue made you think differently about how you screen middle market deals, or how you approach your next financing, forward it (or share this link) to one person in your network who'd benefit from the same framing.

Your feedback is appreciated, so feel free to reply anytime.

Thanks for reading. See you next week!

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