Myth Busting: Private Commercial Real Estate Debt

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Tackling common myths. The nascent private credit sectors in Australia New Zealand are not well understood. There are plenty of popular misconceptions regarding how the market works, the degree of investment risks and the consistency of returns delivered over time.

Too small. For global investors, the small size of the local economies often draws comment. However, these markets are highly developed, very transparent and well poised for robust growth, particularly as borrowers continue to pivot from bank to non-bank lenders.

Too risky. There have been a lot of headline news about construction and financing risks. That said, the realised investment risks remain exceptionally low, demonstrated over many years and market cycles. This sector remains attractive for its positive mix of risk and return,

Too opaque. There is a widely held notion that private credit lacks transparency, and this may draw more regulatory attention with concerns over financial system risks. Industry leaders can address this with a higher degree of disclosures over operations and performance.

Too easy. The apparent popularity of private credit is bringing new capital and managers. New operators will find conditions in the sector very challenging. Disciplined deployment is the key, and this needs deep origination teams and strong internal resources to manage risks.

The strategic path ahead. In this market environment, finding the right private credit manager and partner is the key. This would go a long way to getting clarity on how the sector works and the risks involved Accessing the right skill set for this sector is vital to success.