In this edition of Capital Conversations, MONTICELLOAM, LLC Co-Founder and Board Member Thomas Lally and Senior Managing Director Charles Ostroff share their insights on market conditions across seniors housing and multifamily, including aggressive capital entering the market, the return of banks, and maintaining discipline amid market volatility.

 

As you look back on the past year, how would you characterize deal flow and market conditions across multifamily and seniors housing?

Charles: What really stands out is the sheer volume of deals we reviewed. Both the number of deals and the dollar amount of deals were staggering. A large portion of that activity stems from 2021-2022 vintage transactions, and in many cases, the path forward requires fresh equity or a meaningful reset. At the same time, the deals that do make sense have become much more competitive. In some cases, lenders are pushing proceeds higher or pricing tighter in ways that raise questions about long-term returns and exit assumptions. That kind of environment requires discipline, especially when not every transaction deserves to be financed.

Thomas: I’d add that throughout the year we saw spreads steadily tighten as more capital re-entered the market. That can be healthy, but it also means you must be careful about who you’re competing against; some are focused on buying market share compared to others who may look to generate returns.

In seniors housing specifically, we felt increasingly comfortable being selective but aggressive where it mattered. Our comfort around loan-per-unit metrics, state-level reimbursement dynamics, and cash flow durability allowed us to lean in with the operators we trust. As a result, we saw more opportunities come our way as the year progressed.

 

There’s been a lot of talk about aggressive capital entering the market. Who are those players, and how does that affect competition?

Charles: Much of that capital comes from newer entrants that are well funded and eager to get money deployed quickly. In some cases, they’re backed by large pools of capital and are willing to prioritize volume over profitability early on.

The challenge is that aggressive pricing doesn’t eliminate risk; it often just pushes it further down the road. Without the infrastructure, asset management depth, or patience to manage through cycles, those strategies start to cut into profitability rather quickly.

We look at capital allocation as a marathon, not a sprint. It’s much more important for us to be a player in the market a year from now than it is to close whatever new deal we’re looking at today.

Thomas: Over the years, one thing has proven consistent: strategies built on gaining market share rather than sound economics rarely end well. The market is far bigger than any one participant. If you take your eye off profitability, eventually reality catches up.

What we have here is a team that’s been through multiple cycles. That experience reinforces the importance of lending the right amount of money to the right borrower at the right return. Patience and discipline are expected to win out, even when markets feel competitive.

 

Earlier last year, banks were largely on the sidelines. Are you seeing them come back into the market?

Thomas: In seniors housing, banks are back, but they are taking on a different role. More often, they’re participating as partners rather than lead lenders, providing financing on senior portions of capital structures or backing facilities alongside institutional partners.

That shift makes sense for them. It’s a more efficient use of their equity and allows them to participate in the asset class without having to directly manage all the operational and asset-level complexity. In many ways, it’s been a productive evolution for both sides.

Charles: I agree. Banks are generally taking a more subordinate position today. Between staffing reductions and lessons learned from recent challenges, they’re more inclined to work with experienced platforms rather than lead deals themselves.

You’re also starting to see more creativity as banks work through their maturities, like splits between A and B notes or partial write-downs to get deals resolved. While I don’t think there’s a single “new norm,” there’s clearly more flexibility emerging as institutions figure out how to address legacy issues and move forward.

 

With so much volatility, what principles are guiding your investment and lending decisions today?

Thomas: The core of our approach hasn’t changed: pick the right operator, pick the right borrower, and lend the right amount of money. Value is not defined by where the most aggressive lender is willing to price a deal; it’s defined by fundamentals. We underwrite to our view of value, not the market’s most optimistic version of it.

There are many ways to assess value, whether through cash flow durability, loan coverage, replacement cost, or unit economics, but all roads eventually lead back to the same question: is this capital protected and fairly compensated? That discipline has served us well across cycles.

Charles: For me, everything starts with the exit. I don’t think of our approach as conservative; I think of it as prudent. Appraisals can offer context, but they’re backward-looking. What matters is where the deal is going two or three years from now and whether there’s a viable path to refinancing or sale.

We look closely at occupancy quality, reliance on concessions, supply pipelines, and sponsor execution. We also don’t lend with the intention of owning assets. While we have the capability to step in if needed for some cases, that’s not the goal. Our focus is on alignment, execution, and clear outcomes.

 

Looking ahead to 2026, where do you see the biggest opportunities and risks?

Charles: I think we’re entering a window where lending and transaction activity can start to open up again, particularly in the bridge and acquisition space. As rates stabilize and debt yields improve, exits become more durable, and flexibility increases.

Our focus remains on the middle market range, where diversification across geography and asset types helps manage risk. We’re also keeping a close eye on markets that have experienced outsized growth and supply in recent years, making sure any opportunity truly makes sense on a forward-looking basis.

Thomas: Interest rates remain the central variable. Whether the 10-year Treasury settles closer to the mid-threes or low-fours, we’re still operating in a historically reasonable range. The bigger question is uncertainty, specifically how the Fed balances inflation and employment, how markets digest economic data, and how borrowers adapt.

That said, uncertainty also creates opportunity. Markets don’t stay static, and each new day brings a different setup.

 

Have a topic you’d like Tom and Charles to discuss? We invite you to share your ideas by reaching out.