Student Housing Surge

Student housing has become an increasingly attractive asset this past year. Pre-leasing numbers, current occupancy rates and year-over-year growth reached near all-time highs, indicating a robust market. In contrast to the plateaued multifamily housing market, student housing just experienced an average yearly rent surge of around nine percent. This acceleration is likely attributed to higher college enrollment rates and the phase-out of remote learning.

Students who took pandemic gap years are back, and international enrollment is making headway. Enrollment increases are most prominent in notable universities with Division I programs and better brand recognition. Students are back in droves, and it appears they are looking for the quintessential college experience.

The student housing market presents favorable conditions for new supply. In fact, data shows that between 2010 and 2020, universities added 60,000 to 70,000 new beds annually. However, in 2022 the rate declined to only 25,000 beds indicating an undersupplied market, particularly on campuses transitioning from “commuter” to “resident” settings.

A rising trend of commuter-style, city institutions shifting to resident campuses makes them prime candidates for substantial housing growth. Florida International University and the University of North Texas are examples of urban-centered campuses with a large influx of resident students.

While the student housing market presents attractive opportunities, it has its challenges. Local political structures and associated “not in my backyard” sentiments can pose significant hurdles. Developers can’t simply plan to build cookie-cut designs across all college towns and achieve success. Barriers to entry can make development a headache but, at the same time, prevent oversaturation and promote a balanced market.

There is a common misconception that regional banks comprise the majority share of financing for standard multifamily properties. Though, student housing receives a chunkier portion of local financing. Regional banks often have better market understanding and the right connections to pull strings on these types of deals.

Developers may have to get creative with their financing if regional banks are continuously sidelined. It is also worth noting that cap rates for student housing properties are typically 80 to 100 basis points higher than standard multifamily housing. Fortunately for developers, recent net operating income growth in student housing helps offset the valuation impact.


Richter, Joseph, et al. “Daily Beat – Commercial Real Estate News.” Daily Beat, 25 Sept. 2019,

Spotify. (2023, May 9). Student  Housing: Thriving Market Trends and Investment Opportunities. America’s Commercial Real Estate Show. episode.


Interest-Rate Caps

Real estate investors with floating-rate loans will purchase rate caps as insurance from rate hikes and increased debt service. In fact, many commercial mortgage-backed security (CMBS) lenders will require their borrowers to purchase rate caps. If the Secured Overnight Financing Rate (SOFR) rises above a predetermined strike rate, the cap is considered “in the money,” and the borrower will receive monthly payments equal to the difference between current rates and the strike rate. Rate caps are paid with an upfront payment to the provider and typically last two or three years. For some time, pandemic borrowers enjoyed protection from the Federal Reserve’s increased rate hikes but now find themselves in hot water as their rate caps begin to roll off.

On a $100 million loan, a three-year rate cap at three percent purchased in 2019 cost $98,000. Today’s price is $3.48 million. Rate cap providers, most of which are banks, have been raked over the coals to make good on their promise. They are looking to recoup their losses now by charging a premium. Landlords now face a tough decision: fixed-rate financing at current rates or paying the premium. Economic volatility and the uncertainty of future interest rates only make this decision harder. Borrowers can find themselves forced to sell, default or break out the checkbook.

An estimated one-third of commercial property debt is floating rate. Since most CMBS lenders require rate cap purchases, real estate sales could significantly increase if landlords don’t have the necessary liquidity. Heightened sale volumes would inversely lower real estate values, and the market would see a repricing of assets. Landlords must take a careful, calculated approach to navigate the remaining market troubles. Contact the professionals at BayBridge Real Estate Capital for consultation in this area of expertise.


Richter, Joseph, et al. “Daily Beat – Commercial Real Estate News.” Daily Beat, 25 Sept. 2019,

Rogers, J. (2023, January 23). Expiring interest rate caps to fuel distressed property sales. GlobeSt. Retrieved May 5, 2023, from

Ryan, C. (2023). Landlords May Get New Reason To Sell. Wall Street Journal.


Golf Course Repurpose

Many golf courses across the U.S. have closed as the sport’s popularity continues to decline, especially among younger generations. This has led to a surprising trend in the Chicago suburbs, where industrial buyers are snapping up golf courses for their land at a rapid pace, according to CoStar.

Golf courses offer hundreds of acres of suburban land, making them a perfect fit for industrial-development repurposes. However, this new trend raises the question of who would want to trade views of beautiful, lush green landscapes for industrial buildings and metal sheets. Communities and developers are working together to figure out how best to balance the interests of developers and residents.

While developers may be interested in turning golf courses into industrial sites, locals may be averse to truck traffic and unsightly buildings. Developers must work closely with residents and officials to transform open spaces.

Saxon Partners took advantage of an opportunity to purchase the Lansing Country Club for $2.5 million when it went on the market. The developer got approval from officials in Munster, Indiana, to create a $160 million campus for research and light manufacturing. However, the approval process took more than four years because the area’s zoning was changed from industrial to mixed-use, and prospective developers walked away.

The declining popularity of golf has resulted from the waning of the “Tiger effect” from the early 2000s when many municipalities opened their own golf courses to cash in on the sport’s jump in popularity. These publicly owned courses do not pay property taxes, which has put pressure on the privately owned competition. Consequently, property taxes hit the Lansing Club hard, costing members roughly $155,000 for the portion of the club located in Cook County Illinois.

While some golf course sales have been successfully repurposed, others have faced challenges from residents and officials who oppose proposals to build new housing on golf course sites. When weighing the pros and cons of repurposing golf courses, it is worth noting the economic benefit in the form of job creation and increased tax revenue. Despite the public’s concerns, developers remain interested in purchasing golf courses with at least two more deals expected to come in the Chicago market.

Rogal, B. (2021, May 14). Golf courses sell at fast pace, but developers are taking Mulligans on Reuse. Bisnow. Retrieved April 14, 2023, from




Press Releases

BayBridge Real Estate Capital Announces Addition

NEW YORK, April 10, 2023 – BayBridge Real Estate Capital today announced that Sam Talkow joined the firm as director of equity services.

Talkow has specialized experience in real estate debt and equity originations and underwriting. Throughout his career, he has been involved in high-profile deals, including asset and business risk management and sourcing capital in the real estate and health sectors.

Director of BayBridge Real Estate Capital Jay Miller commented, “Our firm has become known for our ability to put together complex capital stacks for deals across the country. Sam’s institutional background will add to our client services and enable us to expand our expertise on the equity side of our offerings.”

Talkow began his career at the commercial real estate special situations desk of Deutsche Bank. He also worked with Monticello Asset Management, focusing on healthcare investments and eventually assembling the commercial real estate desk.  Most recently Talkow worked at Ladder Capital as a member of their debt and equity originations team.

He holds a master’s degree in real estate and financial investment and analysis from the NYU Schack Institute of Real Estate and a bachelor’s degree in business from Boston University, Questrom School of Business. Talkow is a former member of the Boston University and Israel men’s national lacrosse teams.

He will be based in the firm’s New York City office.

About BayBridge Real Estate Capital

 The BayBridge Real Estate Capital team has a long history of bringing institutional capital to markets across the U.S.

BayBridge helps developers and investors find the financing they need for a broad range of commercial real estate projects, with a focus on structured finance. The firm has offices in Miami, Ft. Lauderdale, Boca Raton, West Palm Beach and New York City.


CMBS Trouble

Commercial mortgage-backed securities (CMBS) are investment products that offer liquidity to commercial lenders and real estate investors by using mortgages on commercial properties as collateral. These fixed-income investments provide a relatively reliable source of income to investors while also providing financing opportunities to commercial lenders. However, in 2023, the reliability of CMBS is deteriorating in step with defaulting office properties and a turbulent macroeconomic landscape.

J.P. Morgan has forecasted that, in the likely event that office occupancies don’t recover from their pandemic slump, approximately 21 percent ($39 billion) of CMBS loans linked to office properties are at risk of default. This default rate could result in an 8.6 percent loss for loan holders, translating to $38 billion in losses for the banking industry and $16 billion for life insurance firms. J.P. Morgan acknowledged that the cumulative losses might be bearable, but the banking industry, which is already under pressure due to a deposit outflow, will feel the impact. According to Yahoo Finance, regional US banks are heavily invested in commercial real estate, holding about 70 percent of the outstanding commercial property debt. In more severe scenarios, where office occupancies shrink by 20 and 30 percent, J.P. Morgan estimates that the default rates could increase to 28 and 35 percent, respectively. According to the bank, commercial mortgage-backed securities make up 22 percent ($549 billion) of commercial real estate loans, excluding multifamily, of which $185 billion is exposed to office properties.

CRED iQ analytics help quantify the distress in metrics beyond dollars and cents. Their data reported a month-over-month increase in the special servicing rate for CMBS loans, representing loans managed by special servicers regardless of delinquent status. The rate grew from 5.10 to 5.53 percent, with a 40-basis point increase over the last two months. When combined with the delinquency rate, the resulting distressed rate stands at 5.73 percent. The overall distressed rate increased compared to the previous month’s rate of 5.29 percent, with distressed rates generally slightly higher than special servicing rates. Many distressed loans are managed by special servicers.

The risk of default is driving the prices of CMBS loans down, inversely increasing yields. Rising yields are blowing out the spread between CMBS and U.S. government bonds, which indicates a decline in trading activity and decreased capital flow. As banks pull back on lending, expect mortgage REITS, life insurers and bridge lenders to step up to the plate. However, lending platforms across the board will tighten up their underwriting standards.

Works Cited

Stribling, D. (2023, April 3). Nearly $39B in CMBS office loans will default, J.P. Morgan predicts. Bisnow. Retrieved April 7, 2023, from

McDevitt, M. (2023, April 3). CMBS delinquency rate increases in March. Commercial Observer. Retrieved April 7, 2023, from