Commercial real estate (“CRE”) private credit has a place in every portfolio, especially in the current economic environment, which is marked by peak prices, volatility, and slowing growth. This asset class has gone from being virtually untracked 20 years ago to $60B in dry powder (raised but uninvested capital) in recent months.
Regulations on banks after the last financial crisis combined with new laws benefiting smaller investors have allowed this space to thrive in the last five years. Investors have discovered its appeal and we think it’s here to stay. Before we dive into what investors are finding so compelling, let’s define what “CRE private credit” is.
CRE private credit is an asset class that consists of loans backed by commercial real estate properties. The properties act as the loans’ collateral such that, in the event a loan does not perform, the lender can take ownership of the property. This structure can increase security for a lender and reduce the risk of loss on an investment.