In the dynamic landscape of commercial real estate, investors are searching for investments that can deliver reliable, competitive, and consistent income throughout the market cycles. One asset class that is doing just that is private credit.

Private credit has been a growing force in the financial landscape of commercial real estate, offering unique opportunities and challenges. Peachtree Group has put together an educational series to define what is private credit. The series includes the explainer video below, and then to shed light on this fascinating sector, we’ll hear from an exceptional team of senior leaders at Peachtree Group. They’ll use their wealth of experience and knowledge to share what they are seeing within private credit.

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But what exactly is private credit, and how does it shape the commercial real-estate market? Private credit refers to loans provided by lenders other than traditional banks, primarily used to finance a commercial real estate project. These projects can range from the development of office buildings and shopping malls to industrial warehouses and residential complexes. This is referred to as asset-backed lending because the loans are secured against physical assets, like a hotel or an apartment building.

Borrowers of private debt can include developers, large private companies, family offices, and high net worth individuals. For borrowers, private credit offers flexibility, shorter approval processes, and customized solutions that may not be available through traditional bank loans. Unlike bank loans, which are subject to strict regulations and underwriting standards, private credit transactions are often structured to meet the unique needs of each borrower. Because banks are often unable to underwrite these loans, private credit lenders tend to charge a higher interest rate than the banks.

One of the primary risks of a private credit loan is the risk of default, or in other words, when a borrower can't make their loan repayments. To reduce this risk, Peachtree Group reviews every loan we underwrite, conducting due diligence to assess the credit worthiness of borrowers, looking at factors such as asset type, location, demand drivers, loan term, and loan-to-value ratios.

Private credit investors play a crucial role in the real estate market by providing capital at various stages of a project, from acquisition and development to refinancing and recapitalization. A Private Credit fund operates by selling units to investors, such as family offices, and private investors. Peachtree Group, as an investment manager, allocates these funds to a portfolio of loans, choosing which projects to lend to and which projects to pass on. In an ever-evolving market, private credit offers a solution for borrowers, and an opportunity for investors.

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Learning about private credit through the perspective of seasoned professionals is the best way to understand its potential. If you want to learn more about Private Credit follow our “What is Private Credit in CRE” series on the Peachtree Group YouTube Channel.

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