Why Real Estate Debt & Why Now?

Nasir Alamgir
Head of U.S. & European Real Estate Debt

Rupert Gill
Head of European Real Estate Debt Portfolio Management

Lincoln Janes, CFA
Senior Director, Real Estate Research & Strategy

Brian Garvin
Associate Director, Real Estate Research & Strategy

Commercial mortgages offer similar benefits as private debt along with the security and optionality of real estate equity. Amid a wave of refinancing needs and lower bank activity, non-bank lenders are finding stronger structures and better pricing opportunities.

Why Real Estate Debt?

Private real estate debt brings together some of the most attractive features of both private real estate equity and private credit. In the current cycle, investors are positioned to benefit from three mutually reinforcing trends: a substantial wall of maturities coming due for refinancing over the next several years, gradually improved transaction volumes, and lower activity from certain parts of the banking sector. Together, these factors are expanding the opportunity for non-bank lenders to originate loans on more favorable terms—often with stronger structures and better pricing than in prior cycles. For both longstanding market participants and newer investors, the forward-looking case remains compelling.

What Makes It Compelling

Private real estate debt has long been a complimentary component of many institutional investors’ allocations. Its relevance has endured across market cycles and economic environments, largely because it offers investors a variety of ways to pursue attractive risk-adjusted returns. Under the umbrella of real estate debt, investors can target distinct combinations of property type, cash flow profile, capital structure position and geography—tailoring allocations to their own unique objectives and to prevailing market conditions, without abandoning the security that comes from lending against hard-asset collateral.

Private real estate debt can take many forms, but its enduring appeal for investors is rooted in three primary characteristics:

• Inherent Security
• Clear Pathway to Potential Alpha
• Portfolio-Construction Flexibility

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