Why it’s (still) a good time to invest in private real estate credit

We believe it’s a good time for debt. Benefits include diversification—a lack of correlation to other asset types— as well as returns comprised primarily of income, attractive relative value, and equity cushion to absorb asset stress due to unexpected events. Given current market opportunities, private real estate credit looks particularly attractive today.

AT-A-GLANCE

Private real estate credit funds continue to see steady growth in assets under management, and it’s easy to see why:

• Traditional lenders have continued to pull out of the commercial real estate market. At the same time, demand continues to rise (the wall of maturities is now $2 trillion, according to the Mortgage Bankers Association). This combination has created a lender’s market, with favorable conditions including rising spreads and total yields.
• High interest rates have driven capitalization rates higher, which has created opportunities for new investments sized to reset values—generating fresh equity buffers, lower exposure levels, and higher returns.

The opportunity for private real estate credit