There’s a clear opening for investors who specialize in quickly revitalizing dated properties... Given that private finance is a key tool for such a borrower, this too bodes well for the strength of the market.”
that it remains significantly larger than it was before 2015. It is now estimated that the annual volume of lending ranges between $40-50 billion a year and that the total transaction volume (including transactions that weren’t funded) is around $150 billion a year. As the private lending market has grown, it has also become increasingly institutionalized. During the last decade or so, institutions have shown an increasing appetite to invest in the loans originated by private lenders. In many respects, this is part of a realization that banks can’t really compete with the new breed of private lenders, who
are far more tech-enabled and agile than a bank could ever hope to be. That said, banks do see real estate bridge financing as an attractive asset class. Rather than lending directly to borrowers, they participate by providing institutional capital to private lenders, enabling those lenders to expand their loan portfolios. As the sector has grown, a wider range of institutions has entered the space, and investor appetite now extends well beyond traditional banks. Last year, the market saw its first publicly rated securitizations of real estate bridge loans, opening the door for a broader group of investors—including pension
funds, insurance companies, and sovereign wealth funds—to participate.
TAIL WINDS FOR INVESTORS Several tail winds drive the private lending market, which is good news for lenders and borrowers who increasingly rely on private finance as a key tool in building their real estate empire.
Some of the key considerations to keep in mind:
UNDERBUILT HOUSING. Multiple studies (e.g., from Freddie Mac, the National Association of Realtors, and others) estimate the U.S. faces a housing shortfall
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