Real estate credit 

Are recent headlines a cause for concern? 

Over the last year, the real estate credit market has been experiencing challenges as the decline in real estate valuations and the higher cost of debt have caused structural issues for the record volume of loans originated at the market peak when real estate valuations were at cyclical highs following a decade of low interest rates. In this whitepaper, we explore the opportunities and risks for investors across real estate credit in the next 12 to 24 months.
"The math behind cap rate-expansion and higher discount rates has led to an estimated US$145 billion debt funding gap in the US. There is approximately US$42 billion dry powder within closed-end real estate debt funds and US$217 billion for closed-end real estate equity funds in the US, though not all equity strategies will be focused solely on providing gap capital or distressed opportunities."

Discover our insights into:

  • Potential investment opportunities in opportunistic real estate funds from 2024 to 2026, as distressed assets may become available at attractive prices.
  • The attractiveness of senior/whole loan debt for institutional equity sponsors, given the more attractive risk-adjusted returns in this sector.
  • The potential for private real estate debt strategies to deliver equity-like returns in the near-to-medium term, considering the higher interest rate environment and reduced bank financing.
  • Distressed mortgage-backed securities (MBS) for potential mispriced assets.

By understanding these dynamics, investors can make informed decisions and capitalize on the potential opportunities in the real estate credit market.

At Mercer, our team of alternative investments specialists are dedicated to helping you create a portfolio that aligns with your organization’s investment objectives. With our extensive knowledge, deep expertise, and global scale and resources, we may be able to provide you with access to a wide range of alternative investments tailored to your specific investment needs.*

By partnering with Mercer, you gain access to a wealth of experience and a flexible approach that can accommodate both first-time investors in alternative investments and those with established portfolios. Whether you’re exploring real estate or other alternative investments, our team can guide you through the process and help you achieve your investment goals. Take the first step towards constructing a successful portfolio by contacting a Mercer consultant today. We are ready to assist you in navigating the complexities of alternative investments and creating a strategy that fits your unique requirements.

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* Mercer cannot guarantee access to opportunities