We believe the higher-for-longer interest rate environment – alongside other fundamentals – has created significant opportunities in CRE debt
The current real estate cycle is driven not by overbuilding but by the rapid rise in interest rates post COVID, and the higher-for-longer interest rate environment. In this video, Fortress leaders discuss how this has created potential opportunities for private credit lenders.
A new type of real estate cycle:
- High rates have caused a correction in valuations across many CRE segments.
- Private lenders now have the ability to originate loans on a lower basis.
- Potential opportunities to finance high quality properties on favorable terms.
Fortress’ positioning:
- Experience navigating multiple credit cycles give Fortress the knowledge of how to adapt quickly.
- Focus on lower-leverage loans with improved covenant protection.
Tim Sloan: This real estate cycle is driven by volatile interest rates. And let me tell you why that's important. Prior real estate cycles were driven by a tremendous amount of overbuilding or an economic calamity. Today's cycle is driven by the fact that rates were almost near zero, and now they bounce back up. That's driven property values down even on well performing properties with relatively strong operations.
Spencer Garfield: Private capital lenders find significant opportunity in today's market because the banks themselves are really out of the market.
Tim Sloan: It allows us to be able to lend at a lower loan to value on high quality, well-performing properties, but because there's less competition, because banks are less interested in competing and renewing many of these loans. So it creates an opportunity.
