Commercial real estate debt (CRED) funds

Street CRED – Video series

Watch the Centuria Bass Credit four-part video series, Street CRED, with Ausbiz host, Andrew Geogheghan, where we pave the way to Commercial Real Estate Debt (CRED) investing for shorter term exposures with the potential for higher risk adjusted returns.

Every effort has been made to ensure that the information provided is accurate (as at August 2022) and is the opinions of Yehuda Gottlieb, Partner at Centuria Bass. Information can change without notice and we do not give any warranty as to the accuracy, reliability or completeness of information within this series. This video series is not an offer for, and should not be taken to constitute, an offer to invest in Centuria Bass investment vehicles (Funds). There are risks in investing, which include the risk that part or all of your investment may be lost.

Commercial real estate debt capital markets

Currently, the unlisted commercial real estate debt fund market is focused on senior loans, as the major banks have tightened their lending criteria. Senior loans are first in line to be repaid at expiry of the loan or where the loan is enforced while mezzanine is the last. Therefore, senior loans are considered less risky and consequently pay a lower return.

From a borrower’s perspective, these types of loans are increasingly prevalent and are often referred to as non-bank lending. Currently in Australia, the big four banks dominate all lending with more than 75% market share¹. However, in the US, bank finance accounts for less than 40%². We could see this trend from non-banking finance lending replicated here in Australia.

1. According to the Australian Government Productivity Commission’s Competition in the Australian Financial System, Productivity Commission Inquiry Report Overview and Recommendations (No. 89, 29 June 2018).

2. According to the US Federal Deposit Insurance Corporation (FDIC) Quarterly – Bank and Nonbank Lending over the past 70 years, Chart 1