The Rise of Private Credit in Australian Commercial Real Estate

Private capital is playing an increasingly important role in Australian commercial real estate, giving borrowers access to funding structures that can be more flexible than traditional bank finance.

Australia’s commercial lending market continues to evolve.

Banks remain an important source of capital, but increasingly complex transactions, tighter credit parameters and the need for greater execution certainty have created opportunities for private credit providers to play a larger role.

For property investors and developers, this means the question is no longer simply, which bank will provide the cheapest loan?

The more important question is often: what capital structure best supports the transaction and its ultimate exit strategy?

Why borrowers are turning to private credit

Private credit can provide flexibility where conventional lending parameters may not align with the underlying transaction.

This can include situations involving:

• property acquisitions
• refinancing
• bridging requirements
• development sites
• construction
• residual stock
• equity release
• transitional assets
• complex ownership structures
• time-sensitive transactions

The attraction is not simply access to capital.

It can also be speed, flexibility and certainty of execution.

A borrower may be prepared to accept a higher cost of capital where the funding allows them to secure an acquisition, complete a development, refinance an existing lender or execute a broader commercial strategy.

Structure matters as much as price

Interest rate is important, but sophisticated borrowers increasingly look beyond headline pricing.

The true commercial assessment should consider:

Leverage
How much capital can be provided relative to the underlying asset?

Term
Does the facility provide sufficient time to execute the business plan?

Servicing
Is interest serviced monthly, capitalised or structured in another way?

Covenants
Do the facility conditions provide enough operating flexibility?

Execution certainty
Can the lender actually complete within the required timeframe?

Exit strategy
How will the facility ultimately be repaid?

A cheaper facility that cannot execute or does not align with the transaction can ultimately be more expensive than appropriately structured private capital.

The growth of alternative capital

Australia now has a deeper ecosystem of private credit funds, institutional investors, family offices and specialist lenders willing to consider transactions outside traditional banking parameters.

This creates greater choice, but it also creates complexity.

Different capital providers have different mandates, risk appetites, sectors, leverage parameters and return requirements.

Finding capital is therefore only part of the challenge.

Structuring the transaction and matching it with the right capital provider is increasingly important.

Global Path’s approach

Global Path Finance approaches commercial funding from the perspective of the entire transaction.

We seek to understand the asset, borrower, capital requirement, business plan, risk profile and exit strategy before determining the appropriate funding structure.

Our capabilities span commercial lending, capital advisory, arranging, structuring and sourcing capital across private and institutional markets.

The objective is not simply to obtain finance. It is to structure capital around the commercial opportunity.

Discuss your finance requirement with Global Path Finance.