RE Credit vs. Private Credit
Hi guys, I’m currently in PE and am very interested in moving into credit. Could anyone shed some light on the nuances between credit in RE and PC in general and if there is mobility between the two? Thank you!
Definitely easier to go from PC to RE Credit. At large, once you pivot to real estate, you are in it for good.
Nuances of RE Credit:
1: Bank lenders (Balance sheet) - Not terrible hours (45-60), and robust exposure to the capital stack. Most large banks house their CRE lending function (balance sheet, agency, cmbs) in their commercial bank. Majority of deals are secured, first lien financing on stabilized product. Certain banks are more aggressive and will get very active in entity-level financing, transitional (value add/construction), and some middle of the capital stack play. Pay varies across the industry.
2: LifeCo Lending - Similar deal profile to large balance sheet banks. Some are more aggressive, but with massive premiums to invest, they function similarly to banks, especially with the red tape associated with both insurance companies and banks. Pay is generally in line with banks, work/life is as well.
3: Agency Lenders - A bank, NBFI, insurance company, or other specialty CRE finance platforms may have a Freddie Mac, Fannie Mae, or FHA license. Agency lenders will only finance rental housing of 4+ units. Fees are better with FHA vs Fannie/Freddie (150 vs 100 bps respectively (some nuances here)). Pay varies by shop, especially the profile of shop (bank vs lifeco vs explicit agency lend ing) but banks/lifeco generally pay better than NBFI (Greystone, Lument, Berkadia, etc). Very niche.
4: Megafund-backed CRE lending - Most risk-oriented platforms are MF backed CRE lenders. Very active in transitional and middle of the capital stack product. As many of these platforms have robust real estate equity investment functions, they have the expertise to own and will take the keys back if they must. Hours are worse than the aforementioned CRE lender profiles, but pay is markedly better and name recognition is something that will stick with you when you want to work for yourself.
There are definitely other facets to CRE lending that I am not hitting, but this is a broad overview of the tip of the iceberg. Across the board, cre finance pays well, hours are good to eh, and the people are generally outgoing, driven, and fun to be around. hi
Which banks are more aggressive in your opinion?
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