Rethinking the Multifamily Capital Stack

Multifamily finance has become even more dynamic lately as borrowers balance wide-ranging capital options against elevated financing costs, disciplined underwriting standards, and shifting investment objectives. In this economic climate, refinancings have been the predominant component of lending activity, accounting for 65 percent of originations in the second quarter of 2026, according to Arbor Realty Trust and Chandan Economics’ latest Small Multifamily Investment Trends Report. As owners navigate loan structures originated in a lower interest rate environment, many have found answers in complex solutions beyond a traditional mortgage.

Balancing Flexibility with Certainty

In today’s competitive marketplace, sophisticated financing strategies that combine multiple sources of capital empower borrowers to not only refinance maturing loans but preserve liquidity and avoid large equity contributions.

Borrowers considering refinancing, or with value-add business plans, may benefit from a financing approach that combines near-term flexibility with a clear path to permanent agency financing. As a result, more layered and customized capital structures have become the new normal in multifamily real estate finance.

The Evolving Multifamily Capital Stack

In the current cycle, commercial real estate financing structures often extend beyond a conventional mortgage and sponsor equity. Borrowers have instead been combining bridge loans, agency financing, preferred equity, supplemental debt, and sponsor capital to address financing gaps and create flexibility throughout property lifecycles.

For instance, a value-add acquisition may require a combination of senior debt and structured capital to reduce the equity a sponsor must contribute upfront. In refinancing scenarios, borrowers with loans originated during a lower-rate environment may find current proceeds insufficient to retire existing debt, creating a need for supplemental financing or preferred equity to close the gap.

This situation illustrates a broader market reality: first-class financing solutions are tailored to a property’s long-term business plan, not just its current financial performance.

Partnering with a Sophisticated Agency Lender

Innovative non-bank lenders, particularly those with agency lending capabilities, provide customized solutions for today’s economic realities. While banks can be highly competitive on conventional transactions, they may operate within tighter underwriting parameters. Debt funds tend to offer greater flexibility but typically aren’t structured to support long-term agency execution. At the same time, sophisticated agency lenders have evolved into a new role within the multifamily capital stack, providing:

• Consistent liquidity across market cycles
• Attractive long-term fixed-rate financing options
• The ability to serve as part of a broader capital solution

Grow With One Partner Through the Life of Your Loan

At Arbor, the successes of our borrowers are powered by innovation. When we see an opportunity to evolve, we anticipate and adapt. That is why, for instance, we launched Arbor’s Proprietary Preferred Equity behind Freddie Mac Conventional Loans, a different approach to raising capital that enables borrowers to close multiple transactions with a single full-service firm.

Experienced borrowers need a partner with the flexibility to structure customized solutions and the agency relationships to deliver long-term financing certainty. With Arbor’s industry-leading Fannie Mae and Freddie Mac capabilities, our tenured team is uniquely positioned to help borrowers build capital stacks designed for today’s market and tomorrow’s opportunities.

Contact an Arbor loan originator today to get started.