Kevin AmolschIf you have been paying attention to financial news lately, you have probably seen headlines about trouble in private credit. Large names like Blackstone, BlackRock, Blue Owl, and others are being mentioned alongside words like “redemptions” and “liquidity pressure.”
Whenever headlines like this start to circulate, it is natural for investors to pause and ask: how does this impact me?
Let’s break down what is actually happening and, more importantly, what it means for real estate debt investors.
What Is Private Credit?
Private credit is a massive and growing part of the financial system, now estimated at roughly $3 trillion. At its core, private credit exists to fill the gap left behind by traditional banks. Over the last 15 to 20 years, banks have pulled back from certain types of lending due to increased regulation and capital requirements, and entrepreneurs and fund managers have stepped in to fill that void.
These funds provide liquidity directly to businesses that either cannot access bank financing or prefer more flexible terms. In many cases, these are loans to operating companies used for growth, acquisitions, recapitalizations, or working capital.
Unlike real estate lending, these loans are often backed by business assets such as inventory, accounts receivable, or the general balance sheet of the company. Many of these loans do not have an individual personal guarantee. Instead, repayment depends on the performance of the business itself.
Investors like you and me are attracted to private credit for two primary reasons: higher returns and steady cash flow. Compared to traditional bonds or other fixed income alternatives that may yield 2% to 5%, private credit has outperformed and provided greater income.
The Pressure on Private Credit
Many of these loans are floating rate, meaning as interest rates increase, the borrower’s payment increases as well. This has benefited investors in a rising-rate environment, but it has also put pressure on the underlying businesses as their cost of capital rises.
This is obviously concerning with the broader private credit segment, but is more limited in real estate debt because most real estate debt funds that I know of have fixed-rate loans.
Historically, private credit was dominated by large institutional investors like pension funds, insurance companies, and endowments, all of which have long time horizons and could tolerate limited liquidity. More recently, fund managers have expanded access to high-net-worth investors. This has increased the size of their funds but has also increased the demand for investor liquidity. Along with that shift came products offering periodic liquidity to attract investors and some funds may now allow investors to redeem a percentage of their capital each quarter.
Another key point is loan duration. In many private credit funds, “short-term” loans can still mean three to five years, and it is common to see loans extend seven years or more. This ties up investments in longer-term assets while offering liquidity. This is what created the tension and eventual collapse of Silicon Valley Bank in 2023, and it is now causing pressure in private credit.
So What Is Happening Now?
Default rates have increased modestly, with Fitch reporting around 5.8% as of January. While that number has made headlines, it is still relatively low in a historical context. At the same time, redemption requests from investors have increased. This is where the friction begins.
Some large funds have had to manage this carefully. In February, Blue Owl temporarily halted redemptions and sold loans at approximately 97% of par value to generate liquidity. Other large managers like Blackstone, BlackRock, Cliffwater, and Morgan Stanley have also been mentioned by the media in a similar way. In fact, Cliffwater recently received redemption requests equal to about 14% of the total fund value and committed to satisfy less than half.
Something I discussed on a group call with other investors, and something I want to make clear here, is that the issue is not that the loans are suddenly failing. The issue is timing. Similarly, it was not that the treasuries Silicon Valley Bank invested in were going bad, it is the fact that the bank was forced to sell them in a high-interest-rate environment.
The bottom line is that these large fund managers made longer-duration loans, but they are now facing increased demand from investors who want their money back sooner than those loans mature.
Is This a Crisis?
I do not believe so. In fact, the data suggests the opposite.
When loans are sold at 97% of par value in a forced-sale circumstance, that is actually a strong indication that the underlying assets have real value. Default rates remain relatively low, and the majority of loans are still performing.
These funds are not going bankrupt. What we are seeing is a structural mismatch between the liquidity offered to investors and the duration of the underlying assets. This is very different from a credit collapse.
Obviously, we are keeping an eye on this, but none of it changes my opinion of real estate debt as an alternative for higher returns and regular cash flow. This environment reinforces why I have always believed in short-duration, asset-backed lending and why I love what I do.
For our investors, it is important to understand that our typical loans are six to nine months in duration, primarily for fix-and-flip and short-term real estate projects. That shorter time frame naturally creates liquidity. Loans are constantly paying off, which creates flexibility.
Another important difference between real estate debt funds and what we are reading about in the headlines is that real estate loans are secured by tangible, physical assets with intrinsic value. Many private credit funds, on the other hand, are lending against operating businesses where repayment depends on cash flow, market conditions, and management execution. Collateral like inventory or receivables can fluctuate significantly in value and does not provide the same level of stability as real estate.
In addition, Pine funds require personal guarantees, adding another layer of protection that may be absent or limited in corporate private credit structures. Most real estate loans are also fixed-rate loans, so payment pressure has not increased with the recent rise in rates. Our rates have been the same for over a decade, and I don’t see that changing.
On the investor call that inspired this article, a group of highly sophisticated investors came to the same conclusion: short-term real estate lending is fundamentally different and more stable than the broader private credit market. The headlines can be scary, but nothing is changing for us.
