Jeremy Roll, President at Roll Investment Group

When IRRs Lie and Cycles Matter

Guest: Jeremy Roll, President at Roll Investment Group

My guest this week, Jeremy Roll, is a full-time professional passive investor who has spent more than two decades allocating capital across multiple real estate cycles. He consumes macroeconomic data obsessively, tracks capital markets closely, and approaches investing with an explicitly conservative, risk-first mindset.

That combination makes his perspective especially valuable at this point in the cycle, when patience is being tested and easy narratives are failing. Jeremy is not trying to predict the next headline move. He is focused on understanding where we actually are, what has quietly broken, and why capital remains sidelined despite widespread talk of opportunity. The result is a grounded, unsentimental view of 2025 and what truly matters heading into 2026.

The Year Predictability Broke

Looking back at 2025, Jeremy Roll's assessment is sober and revealing. Several assumptions that quietly underpinned commercial real estate strategy for years simply failed. The most obvious was the mantra "survive till 25," built around the expectation that floating-rate bridge loans would be refinanced into a friendlier rate environment. As Roll put it, "I think that broke completely."

Interest rates did not fall as many sponsors expected. Not because the Federal Reserve failed to cut short-term rates, but because long-term rates reflected a different reality. Stronger-than-expected economic growth, persistent inflation risk, uncertain demand for long-term Treasuries, and questions around U.S. debt sustainability combined to keep the ten-year elevated.

The result was not a single shock, but a prolonged erosion of predictability. Tariffs, delayed policy deadlines, front-loaded inventories, and shifting inflation expectations made underwriting harder, not easier. For investors like Roll, who prioritize repeatability and downside protection, 2025 reinforced an uncomfortable truth. The environment rewarded patience more than action.

Why Rates Stayed Higher Than Expected

Roll is clear-eyed about the interest-rate narrative. While the Fed controls short-term rates, long-term yields respond to growth expectations, inflation risk, and perceived sovereign risk. In his words, "lower demand for treasuries… combined with the potential for higher inflation for longer… would also imply higher interest rates."

This matters for commercial real estate because long-term rates anchor valuations.

Even modest shifts in the ten-year Treasury can overwhelm incremental NOI growth. The hoped-for rescue via falling rates never arrived, and with it went the idea that time alone would heal marginal deals.

The Liquidity That Isn't Moving

One of the more puzzling features of the current market is the widely cited "capital on the sidelines." If liquidity is abundant, why is transaction volume still muted?

Roll's answer is precise: The risk reward doesn't make sense. Prices have not adjusted enough to restore positive leverage. Spreads remain tight relative to risk. In that environment, sitting in cash is not indecision, it's discipline.

This is a critical distinction for investors. Liquidity exists, but it is conditional and requires either lower prices or meaningfully better leverage. Until one of those arrives, patience dominates.

The Slow Mechanics of Price Discovery

Unlike the Global Financial Crisis, today's reset has not been forced by regulation. Banks have not been required to mark assets to market. Instead, extensions, modifications, and incremental concessions have delayed recognition of losses.

Roll describes it as a drawn-out process rather than denial. "The extensions are just coming to a head. It's just been too long." Bid-ask spreads remain wide, but they are narrowing as maturities accumulate and lenders become less willing to defer decisions.

Historically, even in multifamily, stabilization took years after the last cycle began. Roll places the current moment closer to late 2009 or 2010 than to 2011. The turn is visible, but incomplete.

Where Distress Actually Creates Opportunity

Roll sees 2026 as a year when inventory finally increases. More lender-driven sales. More forced price discovery. Higher transaction volume. For buyers with the right risk tolerance, that is constructive.

He is careful to distinguish between strategies. Heavy value-add investors are already active and should be deepening relationships now. Those opportunities are "once in a cycle." Miss them, and they will not return soon.

Value investors, by contrast, face a different risk. Being too early. Real estate adjusts slowly, but catching a falling knife is still possible. Roll emphasizes caution over speed. "I'm actually worried about being too early than too late."

The Real Lesson of Floating-Rate Debt

When asked what investors learned from 2025, Roll rejects the simplistic conclusion that floating-rate debt itself was the problem. The deeper issue was cycle timing.

The most dangerous moment for heavy value-add strategies is late in an economic cycle, when runway is limited and assumptions must be perfect. Yet those are precisely the moments when such deals proliferate, because they are the only way to model headline IRRs.

As Roll explains, "The safest time to do a heavy value deal is at the beginning of a cycle." Late-cycle execution risk is asymmetric as small disruptions become fatal.

Sponsors, Incentives, and Discipline

One of the more uncomfortable truths Roll acknowledges is sponsor behavior under pressure. Some operators pursued deals to generate fees, not because the deals were compelling. Others succumbed to FOMO, mistaking activity for prudence.

By contrast, the sponsors who did nothing for several years often emerge stronger. Selling near the top, sitting on cash, and reentering only when pricing resets is emotionally difficult but strategically sound.

Roll's own filter is unapologetic. "The more deals someone did in 2021 or 2022, the less likely it is I'll ever invest with them." It is not judgment. It is philosophical alignment.

How Roll Approaches Opportunity Today

As a full-time passive investor, Roll spends his time networking, sourcing, and studying data. Finding deals, not analyzing them, is the hardest part because many opportunities never reach public solicitation.

In vetting sponsors today, he focuses less on track records in benign markets and more on what sponsors have been through recently. Past distress can permanently raise a sponsor's cost of capital, affecting future returns for investors.

For new investors, his advice is foundational. First, understand the economic and real estate cycles. Second, focus on one asset class before diversifying. Familiarity compounds.

A Market Defined by Patience

Roll's outlook for 2026 is neither euphoric nor pessimistic. It is conditional. Opportunity is forming, but unevenly. Capital will move when pricing and leverage realign. Until then, discipline remains the differentiator.

The investors who succeed will not be the loudest or the most active. They will be the ones who waited, watched, and acted only when the numbers justified it.

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