Real Estate Credit Funds
hey guys, am trying to understand real estate credit funds. Could someone provide an explanation of their structure, use, and any resources to learn more?
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RE credit funds are lenders, with a different risk/reward tolerance than banks, life cos, or other sources of RE debt.
Credit shops can get funded in a variety of different ways - they can raise capital in a true fund structure from LPs, syndicate individual deals to retail or HNW investors, sell off deals post-closing in the CLO market, use a repo/warehouse line of credit, etc. Depending on their source/cost of capital, they’ll have different rates and lending parameters. Higher cost of capital means they’ll take on higher yielding/riskier deals, lower cost of capital suggests they can do cleaner/more straightforward loans.
At a typical shop you’ll have “originators” who source deal volume from debt brokers, past relationships, etc and engage in some (or none) of the underwriting process. You’ll also have more junior underwriters who’ll do the legwork on deals - putting together term sheets, conducting due diligence, credit memos for investment committee, etc.
This is a term generally use to imply "non-bank" lender (and not securitized liked CMBS), beyond that, not tons of rules. It is a fund that raises capital (could be public or private funds, more typically private), utilizes leverage, and makes loans that are typically kept on the balance sheet (they could trade if they wanted). It's an intentionally broad term, but as they are "non-bank" and "non-securitized" they have very few regulatory issues or any real regulator governing their actions; thus, they can do pretty much whatever they want (i.e. riskier loans).
I would look at CREFC or MBA (thats Mortgage Bankers Assoc.) for more info.
What are some of the names of a few credit funds ?
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