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Current Season: First Draft Live
Between economic whiplash, shifting policies and market volatility that changes by the hour, you need industry insights that cut through the noise. That's exactly why we're launching First Draft Live, a new weekly series that breaks down what's happening, why it matters and what you need to know to do better business.
Join us live on Bisnow.com every Friday at 12:30 PM ET / 9:30AM PT for conversations with the industry's sharpest minds discussing the week's most critical stories, or catch the replay right afterwards — here on your podcast app of choice.
Okay. Welcome to 2026, and welcome to season two of First Draft Live. I'm Mark Bonner, business analyst editor in chief coming to you live from New York. Before we get started, I'm proud to say this episode of First Draft Live is presented by Agora. Whether you're managing deals, raising capital, or growing your portfolio, Agora is your trusted platform for seamless real estate investment management.
Mark Bonner:Visit agorareal.com to learn more. That's Agora, real.com. Okay. Let's talk about the moment we're actually in today. If you work in commercial real estate, I think you know the this feeling.
Mark Bonner:You go to bed thinking you understand the market, and you wake up to a late night social media post out of the White House that just rewrote the risk conversation. Tariffs, they're back in the bloodstream. Venezuela, now in the energy conversation. Greenland has now somehow become a trade and geopolitical variable. And the Federal Reserve, the institution markets usually treat as untouchable, is under immense political pressure.
Mark Bonner:And in the last day or so, it has come out that The US is actively seeking regime change in Cuba. And that's just the headlines. Let's layer on what the industry itself is quietly also wrestling with. AI demand that looks transformational, but is now being stress tested for durability, power, and grid constraints colliding with data center op optimism. Insurance and operating costs that refuse to normalize.
Mark Bonner:Refinance optionality, shrinking and exit liquidity, getting harder to underwrite. And capital that's available but no longer forgiving. On paper, that feels like the setup that could trigger panic, but it hasn't. Far from it, in fact. Deals are happening.
Mark Bonner:Capital is moving. Office, trading, multifamily, trading, data centers, definitely trading. What's changed is an activity, it's judgment. Underwriting is tighter, holds are longer, structure is doing the work, and conviction has narrowed. Which brings us to the real question of this moment.
Mark Bonner:When all of that hits the market at once, tariffs, geopolitics, AI hype, power constraints, and questions around Fed independence, how does commercial real estate actually respond? Do investment committees cut leverage, pull refinance risk forward, widen exit assumptions, or do they just pause, close the deck, and wait for the noise to pass? That's the conversation we're gonna have today because the real story of 2026 isn't gonna play out on social media or cable news. It's gonna play out inside investment committees. Few people that I know sit closer to that process than our guest today.
Mark Bonner:Joining me is Abby Barak, managing director and head of US debt at BGO, someone who sees exactly intimately how macro uncertainty turns into term sheet math. Abby, welcome to First Draft Live.
Abbe Franchot Borok:Thanks for having me, Mark.
Mark Bonner:Real quick before we begin, to our audience, drop your questions and comments into the chat. We'll get to as many as we can. So, Abby, thanks for being here. Before we get into the mechanics, just level with us for a second. You've been doing this a really long time.
Mark Bonner:Have you ever seen this many variables hit the market at once without tipping it into panic?
Abbe Franchot Borok:Yeah. Well, I have to say that was a great intro, and I'm actually going to make sure my team listens to that intro, Mark, because I don't want to make sure we're not forgetting out of any of the risks that are out there right now because there sure are a lot of them, And everything's moving so quickly. But to your question, I would say it is a lot right now. There are a lot of different variables. I think the rapidity with which everything's changing, with which the headlines are changing, with which new macro factors, whether they're policy or macroeconomic, are changing.
Abbe Franchot Borok:And we're hearing those are that's I don't know if I'd say overwhelming, but it's a lot coming at us. Part of that is just the technological advances that we've had as well because we're getting a lot of that information in real time. So I do think, you know, as we start to talk about the investment process and how we're approaching that, you know, I think one of the challenges is sometimes filtering out some of that noise and making sure that we're really dialing back into the fundamentals, what we as a team know about real estate, reminding ourselves that we have been through cycle through disruption like this. I cut my teeth in the GFC. So that was probably what to answer your question, probably the last time we saw this disruption in the commercial real estate markets.
Abbe Franchot Borok:But know, there are a lot more variables, I would argue, coming in into this, you know, most recent cycle that we've had.
Mark Bonner:I mean, the GFC is an interesting example, Abby. I mean, is that really the historical parallel that's actually useful right now? I mean, I remember the GFC. It was complicated. It was painful.
Mark Bonner:It didn't feel as broad and multifaceted in terms of the variables. It seemed very clear, to me. So is that is that is that the right parallel here? Do we all go back to the GFC playbook or is there some other moment in history that could be a more useful guide?
Abbe Franchot Borok:Yeah. No. I would say I think that's the most recent and best data point for the commercial real estate market and just the pressures on valuations and overall market and pause in activity that we've seen over this most recent cycle. In terms of just the variables, there's a lot of additional information that's coming now into the market. But, yeah, I think that, you know, as we look back, I don't think we're playing out the same playbook to your answer.
Abbe Franchot Borok:Think that there's definitely a different approach to some of the downturn that we've seen in the commercial real estate market that we're starting to come out of, I would argue. But that's certainly a data point that we think of as we say and again, I've been a lender my whole career, so it's all about the downside and the stress analysis. But how and the question of how bad can it get and we're still going to get our money back on every loan. And that's a data point that we look to often. It's interesting.
Abbe Franchot Borok:There are a lot of professionals in commercial real estate today that probably hadn't lived through that. So this is their first correction. So kind of pointing to that. And then also getting input from those who lived through similar real estate crises going back even further. So I think allowing that historical experience and maybe not the exact same playbook, but some of that experience that we've all had and making sure that we're kind of communicating that out to our teams as we've faced this most recent correction, found to be helpful.
Mark Bonner:For a lot of people, as you just said, this is their first rodeo. Right? And so that's a great place we can start with that is tariffs. Right? Tariff risk has come roaring back into the market.
Mark Bonner:We dealt with it for much of last year. Now it's back. We're talking about renewed threats and actions around imported steel, electrical components, building systems, the kind of inputs that sit at the heart of construction and heavy value add deals. The issue as we've reported at BizNow isn't higher cost necessarily. It's unpredictability.
Mark Bonner:Sponsors can't lock budgets the way they used to, and ICs are struggling to model downside scenarios if tariffs shift again mid project, which they are shifting right now. We'll see. Taco is sort of happening here with the Greenland. What I'm seeing, Abby, and I'd love you to take me into the room, I'm seeing that deals aren't blowing up, but they're slowing, especially construction and heavy value add because committees can't get comfortable with cost volatility. At least that's my perception from the outside looking in.
Mark Bonner:Take me inside the room. When these tariffs reenter the conversation, what's the first lever that I see is pulling on your end?
Abbe Franchot Borok:Yeah, I mean 2025 is really you can kind of go back a year and look at what transpired over the following twelve months. The first quarter of last year saw a lot of transaction volume. There was definitely a return in activity to the market and that quickly shifted particularly in the equity real estate equity markets with Liberation Day and with a lot of the trade policy that was rolled out very quickly or threatened and then was the uncertainty that came along with that in April. So last year I think was there really was a more of a normalized return to debt capital in the markets. We saw that across our portfolio, our ability to underwrite deals and feel comfortable at our attachment point, comfortable that while there were a lot of these concerns which we can dig into and talk about felt like the market had bottomed and we were able to attach to new reset values.
Abbe Franchot Borok:So that was a positive, I would say. Twenty twenty five was a positive for real estate debt capital in the markets but the equity markets have trailed that. So we saw a real pause to your point. I think as everyone got their arms around some of the trends that will come out, which areas of the market would benefit from the trade policy, which areas of the market we're not going to benefit. I don't think anyone has a crystal ball but there were ways for us through our data and analytics and through our analysis of the policy decisions to kind of begin to pick our spots.
Abbe Franchot Borok:And activity on the equity side has really picked up towards the end of the year and now into 2026. That being said activity is one thing. I think there's still a lot of idiosyncratic considerations that are coming into what deals actually do. So I wouldn't necessarily say that right now activity is completely correlating with deals getting done. But we definitely feel that this year going forward there's a lot of you know, frankly despite a lot of the noise that we've been hearing, we can also point to data that shows that there's real, you know, that we're beginning to see some tailwinds for certain segments of the commercial real estate market.
Mark Bonner:Right, and so let's get into that. This is project by project. There's no automatic yeses or noes. What projects are feeling this the most right now? Ground up, major renovations, adaptive reuse?
Abbe Franchot Borok:Yeah, again transaction activity coming back to the market really for and again for our value add lending business is really a tailwind. So groups out in the market that are buying assets many times at reset bases, putting new cash equity in. That's helpful where we have seen valuations correct in some of the open ended funds and in valuations in existing portfolios but begin to see real market trades on the ground that we can point to is also very important. We are one of the larger owners of industrial, BGO is, across The US. We have about 138,000,000 square feet.
Abbe Franchot Borok:So we're obviously tracking that market very closely. We see a lot of positives as we go forward. That market has bottomed. We're seeing deregulation that makes it easier for companies to make decisions on where they're going to spend money, what kind of leases they're going to sign. We obviously are in a lower to more stabilized interest rate environment.
Abbe Franchot Borok:So I think a lot of us really
Mark Bonner:Well, we'll get into the Fed in a second. Yeah. Don't know how stable it
Abbe Franchot Borok:at the beginning of the year and everyone asks you where interest rates gonna be at at the 2026. And it's a little bit of a a, you know, funny question. But rates have come in. We think they will continue to moderate and stabilize. Inflation is stabilizing as well.
Abbe Franchot Borok:We still have some noise there but there has been stabilization and productivity is solid. So for certain asset classes, industrial, there are also subsections of industrial where we really have been focusing on our debt business. We've been active in manufacturing industrial. So where we've seen this reshoring from the tariffs in the trade, we think that that will continue. Advanced manufacturing, a lot of the some of the policies that have put in place are definitely turbocharging the ability for advanced manufacturing chips and other digital infrastructure that is coming back to The U.
Abbe Franchot Borok:S. So definitely pockets within the industrial asset class where we're seeing interesting opportunities. I'll go to the next asset class we all talk about, multifamily. I mean, there continue to be interesting opportunities there. The debt markets for multifamily have come back.
Abbe Franchot Borok:We had some supply issues there in certain markets but beginning to see that normalize and definitely continue to see that supply demand imbalance persist on an ongoing basis. So again, industrial, multifamily, I'd say for the other main food groups, just signed up our first retail deal in a while. So I think retail has been one of the highest performers over the last two years for commercial real estate. So definitely after many years of almost being uninvestable in certain ways, we're seeing that come back and finding opportunities there. And then office, I'm sure we'll get to that, you know beginning to see some normalization but still a lot of pockets.
Mark Bonner:But Abby just in one sentence right what are sponsors consistently underestimating right now when they pitch these deals and specifically on the tariff fall line?
Abbe Franchot Borok:On the tariff fall line. So I I don't know if it's consistently underestimating, but consistently up against, you know, construction costs and and debt costs. And, again, I think if you look now versus twelve to twenty four months ago, I'd argue those have moderated, but those continue to be it it's very expensive to build, and those continue to be headwinds for for, our business and for our borrower sponsors.
Mark Bonner:I mean working a pro form a right now on the construction side is a nightmare and I've spoken to many heads of construction over the last six months and so it's definitely unpredictable. Contingency budgets have exploded. I mean it's very difficult to predict and all sorts of other things that are happening in the construction industry. But we gotta move on. Let's talk about Venezuela just
Abbe Franchot Borok:always about I'm always about, yeah, we can lift that contingency a little bit more, and let's make sure that we're, you know, adding in some cushion. That being said, it makes you know, when debt levels were as high as they were and construction costs had increased, it created real inability in many cases to develop. So we're beginning to see that moderate, particularly on the debt cost side. You know, for the construction loans where we are lending right now, we really love that, pro form a because we look out three to four years from now and just the supply dynamics in many of these markets have completely shift shifted. So if you look at '24 and you look at the deliveries that came into place, deliveries that that came to be in the market, you know, that's that's just gonna be dramatically reduced over, you know, three to four years out.
Mark Bonner:Okay. We gotta move on. Let's talk about Venezuela. Obviously, we all know The US took out Maduro, seized Venezuelan linked oil tankers, stepped up enforcement around oil flows and sanctions. That doesn't mean oil prices spiked overnight, but it does mean energy volatility is back on the risk radar in a way it hasn't been for years.
Mark Bonner:I would imagine, Abby, that inside the IC, no one says Venezuela. I would imagine that they say volatility assumptions matter again. We're seeing lenders quietly re underwrite tenant durability, especially in logistics, manufacturing, and energy sensitive consumer businesses. Not because tenants are failing today, but because volatility is back in the model. So inside the investment committee, how are you seeing these geopolitics actually translate into the underwriting?
Mark Bonner:Is it in exit caps, proceeds? Is it tenant assumptions? Did Venezuela rock the boat for you guys a few weeks ago?
Abbe Franchot Borok:Yeah. No. I I mean, I'll be really honest. I don't think Venezuela as a as a word has, you know, been a frequent discussion topic. I think, yes, volatility and the macro environment and some of the whether it's Venezuela or Greenland or some of the just very, very disruptive actions that have been taken for good or for bad on the global stage over the last few months, that definitely creates more volatility.
Abbe Franchot Borok:So I would say risk is not being debated in our investment committee. So in those increases, it's really drilling into the details. Does that and to answer your question, how is that coming to bear, it can be all of the above, not at the same time. But it really is dependent on the deal. Is it a market, or does it have a tenant that does have that exposure, either to their supply chain because they are dependent on energy prices?
Abbe Franchot Borok:Is it a certain market? Not to call out markets, but the Inland Empire has a lot of softness. Is that due to trade and our relationship with China? How does that price into tenant demand and underwriting? And it'll include some if we really think that rents are stagnating there or continuing to be soft in the long term, that probably does reflect cap rates.
Abbe Franchot Borok:That being said, we also, on the counter side in The US, have the ability to look at cap rates and say they've really begun to stabilize in certain markets. So it's very much a market by market. That's where we at BGL are using our data and analytics. We're force ranking the 300 plus markets in The US where we're active. Really and again, the data that we're using is not just one I would argue it's not even kind of the historical data we all used on real estate, but really bringing in a lot of different data sources surrounding supply.
Abbe Franchot Borok:And a lot of that comes from some of these macro whether it's the supply chain or tariff policy. And then on the demand side, it's a lot of I think that's probably, to your earlier question about where things are so different right now in real estate than if you look back ten, twenty years. I think the demand question is probably it used to be supply demand. And when there was too much supply, then you were going to have some softness in the market. I think there are a lot of changes in just demand and consumer usage of real estate.
Abbe Franchot Borok:And those probably necessitate a different data source. So we're spending a lot of time saying, is really driving tenant demand for logistics? Or office is a good example where how do we get people back for work from home? What is it about New York and some of the office buildings here really been able to draw people back? And why are other markets like a Denver really lagging?
Abbe Franchot Borok:So all of those data points come together specifically on a deal. And every deal, it's do we is there a reason to get more aggressive and price that more? Do we have conviction around that market because of our data and analytics and because of our teams on the ground? Or do we think some of these bigger macro issues are going to continue to persist? And then we will be looking at you know, delevering or putting more structure in our loans.
Mark Bonner:Okay. If you're just tuning in, this is First Draft Live presented by Agora. We're here with Abby Barak, managing director and head of US debt at BGO. Now, Abby, something that's interesting with this Greenland noise that we've been seeing the last couple of days is that the drumbeat of negativity from Europe and other foreign capital that might otherwise flow freely into The United States is in question. Now there isn't any data so far that that sentiment is going to become reality, But the voices from Europe and other parts of the world are now saying, The US can't be trusted.
Mark Bonner:You guys are too unpredictable. We'd rather flow our capital into Europe or Asia or to Africa, or to Oceania. What do you make of that? Have you seen anything on your end to believe that that's real and that's gonna come to bear fruit in The US market?
Abbe Franchot Borok:I mean, anecdotally, yes. I think I think there Canadians and Europeans that look to The US and are not you know, don't feel good about some of the actions that have been being taken. The but The US continues to be one of the the most liquid and the most active market in the world. So to say that there's been, you know, that's going to translate to sustained lack of investment in The US. I think we, again, see a lot of as we come out of this most recent correction, out of this period of time where there's been a lot of there's been such a dearth of transaction activity, we continue to see that picking up as we go forward.
Abbe Franchot Borok:But certainly, we have a very large European debt business as well. There's really compelling opportunities in Europe right now, partly because just some of their dislocation and the growth of alternative lenders in Europe. We've seen that in The US over the last ten years. While we're a very large player there, it hadn't been as robust in Europe. So many more markets we can invest in there.
Abbe Franchot Borok:And I do think just personally, there will be instances where because of some of the policies here in The US, whether it's foreigners selecting which universities they go to and whether or not European universities continue to grow in enrollment and niche asset classes like student housing there maybe become more interesting to invest in because of those demand drivers, I think we're definitely going to see different ways in which that plays out. But again, and certainly you can see it on some of the shelves, I think, their neighbor. Some of the policies and the rhetoric has
Mark Bonner:You know, when I wonder about this, you know, I don't really wonder about the multinational global players who can pivot into one region or the other. Right? What I think about is is the grand majority of commercial real estate players in The United States are US based, they're only in The United States. And so they cannot pivot into Europe or to Asia or in any other places. Like, if Abby, I mean, put yourself in the shoes of someone who's just a local player or regional player or even a national player just in The United States.
Mark Bonner:Like, would that be a threat of sorts to take seriously, or do you think most of them are just saying that's just noise and it'll pass? Because The US is safe. We are the biggest and the strongest economy the world has ever seen. It is the biggest, most empower powerful commercial real estate market on the planet. And therefore, despite the noise, much of it emanating out of the White House, that the market will survive and will even, in fact, thrive past all of this noise and all of these different variables that it's encountering.
Abbe Franchot Borok:Yeah. I mean, I would argue that that's the case for The US. I think the period where we're entering now, if you compare that to the pre COVID period, there's a lot more that needs to be done on the ground. It's a lot more about income generation and making sure that you can push rents and executing on the business plan on the ground versus cap rates are so low and interest rates are so low, you can make money on a buy just given some of the financial engineering. So I think the boots on the ground, the business plan, what the underwriting of that real estate business plan, that is what we're talking about usually in investment committee, is even more important.
Abbe Franchot Borok:So we are spending more time on let's look at budgets. Let's look at timelines. Let's look at our partner or borrower's track record and their ability to execute and make sure that it's more of an asset specific and business plan specific analysis, I would argue, that's coming out of a lot of this volatility.
Mark Bonner:Okay. I'm sure you know that we have a Fed meeting next week. And the Federal Reserve, the central bank, has itself now become a variable all over again. Between political pressure, legal scrutiny, open questions about independence, the market isn't panicking. It's saying a lot of things, but the market is doing what it does.
Mark Bonner:Right? I would imagine, Abby, that ICs are no longer unwriting a clean, predictable rate path. It's anyone's guess what Powell is gonna do next week. We can go on CalSheet and Polymarket, and we can read the read the the breeze that's blowing there, but we don't really know. I would assume that the biggest changes in pricing today, it's refinance assumptions for tomorrow.
Mark Bonner:When confidence in the rate path weakens, what changes first over in your shop? Loan term, extension test, exit assumptions? What do you think is gonna happen next week?
Abbe Franchot Borok:Yeah. No. I you know, the short answer is we're always kinda stressing those assumptions. Right? Because we wanna make sure we that scenario testing is being done at a very granular level to make sure that we under, to the best of our abilities, understand the exit scenario, that next buyer analysis.
Abbe Franchot Borok:So that's a super important component. I'd say, though, basis matters also. Everything is about where we are on a basis level. What are replacement costs in that market? And how does an existing asset compare to that?
Abbe Franchot Borok:So a lot of it is also driven by just our you know, having been through many of these cycles, having that uncertainty around interest rates. I think the assumption is interest rates are definitely going to be, you know, more around this four per long term interest rates around this 4% for the for a longer period of time. So I think that's what we're assuming. A lot of our loans, we are mitigating some of that interest rate risk, which doesn't necessarily affect the valuations, but allows us to kind of, with floors and interest rate caps, kind of mitigate some of that risk. But I think that's a long answer, Mark, of telling you I don't know what's going to happen next week.
Mark Bonner:Okay. We're running out of time here, but I want to do a little speed round here because I think for a lot of people, what happens in the investment committee is mysterious. So help us to understand what actually happens here, Abby, really quickly. How do ICs actually say no? What's the most common reason a deal quietly doesn't clear?
Abbe Franchot Borok:It's a credit reason for on the on the debt side, and it's an underwriting reason. It's that that that there's not the level of data and market support for underwriting the levels that we would need to underwrite for that to be a good deal. So it's a credit issue.
Mark Bonner:Okay. Does IC protect itself more by changing structure or cutting price? Structure. When committees debate exit cap
Abbe Franchot Borok:I mean, that's that's Yeah. Top of the you know, having a structure in place that allows you most real estate deals, something changes after you close it. Many times it's to the good. Sometimes it takes longer or there are some of these types of unknowns that we've been talking about for the last half an hour. Structure is really where you know the rubber hits the road there.
Mark Bonner:So when when committee debates exit caps are they arguing about the number or about timing and liquidity?
Abbe Franchot Borok:Both.
Mark Bonner:Okay. And what misconception about the refinance window is getting sponsors haircut most often right now?
Abbe Franchot Borok:Misconception about the takeout market. You know, I I think for us, we're very focused on to my point earlier that we had a long period of very low cap rates and very low interest rates, so making sure we're really stressing those appropriately, which for some of the younger folks can be painful, but really making sure we understand what the long term historical averages were and incorporating that into our analysis.
Mark Bonner:How do you feel about the year before you right now? Last question.
Abbe Franchot Borok:I feel optimistic. I wanted to say cautiously optimistic to kinda hedge my bets so to speak. I am a lender, But I'm optimistic. I mean, I think investors will continue to tread lightly. But I think that there's an ability to pinpoint many of the economic data that's coming out and saying that, again, for commercial real estate, we have bottomed out in most markets and most asset classes.
Abbe Franchot Borok:And there's an ability and we didn't even get to data centers. So that's a whole another.
Mark Bonner:You'll have to come on next time.
Abbe Franchot Borok:Yeah, we're excited about what we're doing at BGL, where we're spending our time with clients and investing in the markets and hope that that continues. But are prepared.
Mark Bonner:Okay. That's all the time we have today. Abby, thank you so much for being here. We really appreciate your insight.
Abbe Franchot Borok:Awesome. Thanks for having me, Mark. Have a good weekend.
Mark Bonner:You too. And a big thank you to Agora for presenting this episode of First Draft Live. We'll be back soon with another episode, so don't miss it. You can sign up now on our event page. You can also find today's episode in all of our past conversations on your favorite podcast app.
Mark Bonner:This is First Draft Live. Have a great weekend y'all.