With commercial owners expected to start refinancing properties as borrowing costs ease, a few major players are looking to capitalize with real estate investment trusts.
Goldman Sachs and Fortress Investment Group are among those launching REITs to seize on the changing debt environment, Bloomberg reported. As banks have been pulling back commercial real estate lending nationwide, investment firms are stepping in.
Fortress filed plans with regulators for a nontraded REIT geared towards financing loans across sectors, including hospitality, multifamily and industrial. Fortress is aiming to recruit individual investors for the vehicle, titled Fortress Credit Realty Income Trust.
Fortress plans to originate or acquire senior-secured, floating-rate loans, according to its filings. It also wants to make inroads into residential debt, such as property tax liens, single-family rental loans and jumbo mortgages.
Fortress recently launched a separate nontraded REIT, Fortress Net Lease REIT, which raised $551 million as of June for the buying, financing and leasing of single-tenant commercial properties.
In July, Goldman Sachs filed plans for an REIT of its own, also aimed at making commercial real estate loans. The REIT is looking to raise as much as $1 billion at the outset, according to its filings.
Principal Financial Group is also launching a debt-focused REIT. Both Goldman and Principal are focusing on senior-secured and subordinate debt on commercial buildings.
Because the vehicles are nontraded REITs — similar to BREIT — investors will have opportunities to cash in shares at net asset value. That could attract wealthy investors with net worths above $1 million, or high-income earners.
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Fortress and Goldman Sachs are jumping into the fray now as borrowing and lending is expected to surge on the heels of the Federal Reserve’s big interest rate cut on Wednesday.
Commercial and multifamily mortgage borrowing and lending is anticipated to jump 26 percent this year, according to a Mortgage Bankers Association report that predates the Fed’s monetary policy shift.