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Investing Ideas
Subordinate debt and the new era of real estate investing
Strong fundamentals, constrained bank lending, and reset property values have created opportunities for private credit investors
Key Takeaways
- Commercial real estate (CRE) fundamentals appear positive in early 2026, supported by healthy property-level income, high occupancy and limited new supply.
- Banks are lending on CRE at reduced proceeds (lower leverage), creating openings for private credit providers to supply capital at favorable yields and terms.
- Lending on reset property values at modest leverage enhances lender protections and the potential for higher risk-adjusted returns.
- Subordinate lending may be particularly compelling, as it offers structural advantages
compared with other approaches, including flexible partnerships with senior lenders
and avoidance of financial leverage risk. - Strong industry fundamentals, constrained capital, and historically modest leverage all appear to remain in place for commercial real estate debt in early 2026.
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Subordinate debt and the new era of real estate investing
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Subordinate debt and the new era of real estate investing
Strong fundamentals, constrained bank lending, and reset property values have created opportunities for private credit investors
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