Private credit vs acquisitions?

Ultimately sales and purchases are the life blood of market activity on both the acquisitions and private credit front. Volume is down dramatically across the board for everyone, not just acquisitions folks. Regardless of the rate environment, private credit versus lower leveraged fixed rate will always have advantages and disadvantages. The challenge with floating rate bridge product today is that the higher leverage at 70%+ LTC/LTV is ultimately meaningless when you're buying deals with a 5 handle on the cap rate and your spread is 250 over SOFR (on the low end) or 8% all in. That's just too much negative leverage, especially at the leverage points where private credit makes sense (primarily speaking to the single stack bridge type solutions, there are scenarios where a fixed rate product with mezz/pref makes a bit more sense due to the blended cost of capital being lower than the 8% above).

I have sat in both seats and currently sit in a hybrid. My day to day focus would be geared more towards private credit, specifically subordinate capital (mezz/pref), but also with a significant amount of time spent on the acquisitions side in the form of LP equity through JVs and having previously been in a strict acquisitions role. While we are getting absolutely no common equity across the finish line, there still isn't exactly a plethora of demand for our debt/structured subordinate product either. Sure, plenty of people are exploring what mezz/pref look like today, but the groups actually transacting for the most part are repeat clients.

I've always felt that the best acquisitions folks come from a credit background through interviewing individuals and in speaking with relationships in the industry. Learning to look at a deal through the lens of what can and will go wrong adds a healthy dose of skepticism and realism that many people whose careers started post GFC (mine included) lack due to living in an environment of continued interest rate declines and cap rate compression.

There is some truth to the fact that you can get pigeonholed on the credit side if you are there for 10 years, but that's certainly not the case early in your career. Especially if you're coming from a reputable credit firm.

I'd also ask where your interests are more broadly. Credit can offer a more traditional exposure to "finance" than the acquisitions side. Structured and securitized products (CMBS/CLO), warehouse/repo lines, mezz and debt like pref all lend themselves more toward what traditional finance might look like.

Private credit and acquisitions activity are ultimately highly correlated. I don't see the catalyst on the horizon that leads to 20%+ IRRs in the future on all acquisitions like we've seen over the past decade plus. Near to medium term success on the acquisitions front appears as if it will be meaningfully derived as the operator level. I believe we will see much more dramatic variance in the return profile across various acquisitions teams compared to recent history.