With real estate loans coming due and developers scrambling for cash, private credit funds are gearing up for a busy year.
More than $400 billion in commercial and multifamily debt is maturing in 2021, according to Bloomberg. Without fresh capital to survive the pandemic, owners of distressed property face default.
The predicament for owners creates an opportunity for private lenders to buy up loans and offer new debt.
“In the last 90 days, I’ve had lots of dialogue directly with banks and debt funds in terms of loan sales,” Josh Zegen of Madison Realty Capital told Bloomberg. “We’ve executed on some of it, but I see a lot more going into the first and second quarters of 2021.”
Commercial real estate deals plunged this year as the hotel, office and retail markets struggled to gain momentum following the initial jolt of the pandemic.
Russell Gimelstob, chief executive officer of Los Angeles–based Ascendant Capital Partners, told Bloomberg that offering new debt for distressed properties can bring in returns of between 10 percent and 12 percent.
Buying distressed properties directly could bring higher returns, but those deals are rarer, for now, as lenders work with owners on finding solutions.
That could all change.
“We think equity and real estate trades are going to be more prevalent when the runway ends,” Gimelstob said.
[Bloomberg] — Sylvia Varnham O’Regan