2025 Rate Reality: Who Wins, Who Loses as the High-Rate Era Persists

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 discusses how this has created opportunities for private credit lenders and for private wealth clients.

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.
• 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.

Advisor takeaways:

• Private credit can act as a stabilizer during volatile rate environments.
• Fortress’ disciplined approach helps manage risk while capturing yield.
• Educational insights help advisors explain these dynamics to clients.

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, right, from an investment standpoint for your clients to invest in funds or REITs that are lending on a much more attractive basis.