Borrowers Misread Today's Lending Market, Says Capital Markets Expert
Culby Culbertson of Culbertson Holdings explains that borrowers clinging to 2021 rate expectations and misunderstanding credit availability are creating friction in commercial real estate deals.
Borrowers in today's commercial real estate market are struggling not because of high interest rates, but because they are clinging to misconceptions from the pandemic-era lending environment, according to capital markets broker Culby Culbertson. The founder of Culbertson Holdings, who has closed nearly $550 million in loans since late 2018, argues that the low-rate period following COVID-19 was an anomaly, not a new normal.
"The biggest misconception is that the rates we once saw in 2021 are something we’re supposed to hold onto," Culbertson said. "If you look historically, those rates never existed in our lifetime, not even our grandparents’ lifetime." He uses a simple analogy: capital is a tool, like a hammer, to be used for a specific purpose and returned at a cost. Investors who forget that cost is part of the equation are the ones struggling.
Beyond rates, Culbertson highlights a second critical misconception: that lending is readily available. Banks have pulled back significantly, with most offering around 70% loan-to-value and only reaching 75% for borrowers with strong track records. The 80% leverage common in the prior cycle is largely gone. "Banks have de-risked their credit profile," he said. "Unless you’re taking a real step forward in how you’re presenting the utilization of those funds and your path to repayment, you have a very low likelihood of getting approved."
This creates opportunity for borrowers who adapt. With sellers anchored to prior-cycle prices and buyers becoming more disciplined, the bid-ask gap is closing. Culbertson sees the market approaching equilibrium, not distress. For buyers underwriting deals, the math must hold up on fundamentals: cap rate clearing cost of capital, debt yield, yield on cost, and debt service coverage ratios all must be in range before making aggressive assumptions about future rates. "You can’t buy into the future when it comes to rates," he said. "If you’re buying a stabilized operation at a higher price on the expectation that rates drop, that is not a good business decision."
The winning borrowers are those who have stopped waiting for a return to past conditions and are building deals around today's market. This means tighter equity requirements, more creative capital stacks, and a clear-eyed view of property performance at current rates. Tools like preferred equity, mezzanine debt, seller carry structures, and bridge products exist to help close deals in a higher rate environment. Borrowers who understand how to use them are moving capital off the sidelines.
Culbertson Holdings, based in Dallas, specializes in debt and equity placement for commercial and residential investment assets across multifamily, industrial, hospitality, retail, and land. The firm provides transaction advisory, creative deal structuring, and access to institutional and private capital for acquisitions, refinances, ground-up construction, land development, and value-add projects.