In the dynamic world of commercial real estate, 2023 marked the end of a decade-long run in commercial real estate appreciation. Persistent inflation, unprecedented rate hikes, and bank closures caused buyers and sellers of CRE to reset valuations and evaluate a new paradigm of rates being “higher for longer”. However, as the curtains rose on 2024, a new chapter began—one filled with abundant opportunity, particularly for lenders.
Institutional investors increasingly allocate 20-25% of their portfolios to alternative investments, and Registered Investment Advisors (RIAs) plan to boost their allocation by 88% this year. Real estate constitutes 78% of the alternative investment market, highlighting its significance. Amidst this landscape, private credit emerges as the prime avenue for exposure, offering stability and substantial returns.
At the Arizona RIA Summit, Sortis Capital’s keynote presentation on the abundant opportunities within private credit, undertaken by Founder Paul Brenneke and Managing Director John Robertson, took center stage. Paul and John educated the audience on the role of private credit as a strategy for clients seeking commercial real estate exposure with less risk relative to equity investing, all while achieving a regular income stream that outpaces most bond portfolios.
The allure of private lending lies in its ability to offer a consistent income stream while being secured, in first position, by real property. Unlike traditional fixed-income funds that may have high fees, no tax benefits, longer durations, and lower yield, private debt can provide accredited investors exposure to short-term bridge loans secured by commercial property—a segment that can deliver double-digit coupons.
A quick look at the macroeconomic landscape will tell us that unprecedented shifts are reshaping the investment terrain. The past 18 to 24 months witnessed a dramatic surge in interest rates, triggering a credit crunch and liquidity challenges in the market. Bridge loans have emerged as a hot commodity, offering investors an avenue for high yields in a landscape bereft of traditional opportunities in real estate equity.
Navigating the landscape of private credit requires diligence and expertise. While the rewards are substantial, so too are the risks. Limited access for RIAs and the trade-off between returns and liquidity underscore the importance of partnering with a trusted advisor. Underemphasis on the increasing need for private lending in today’s market, particularly as banks and more traditional lenders adapt to additional regulations or simply choose to reduce their loan portfolio amid uncertainty in the market. The slowdown in real estate lending volume in the previous year makes 2024 especially interesting—a golden opportunity for investors and advisors alike to benefit from this alternative asset class.
By diversifying portfolios and mitigating risk, private credit presents investors with the potential for higher returns, principal protection, and consistent cash flow. Sortis Income Fund (SIF), the flagship private credit fund from Sortis Capital, exemplifies these advantages. With a focus on senior secured loans backed by real estate collateral in the Western US, SIF has distributed over $43.7 million to investors, delivering an annualized net investor yield of 9.33% over 29 straight profitable quarters since inception. 2024 marks a pivotal moment in the evolution of finance—a moment where private credit emerges as the cornerstone of investment strategies. As pioneers in the field, Sortis Capital invites investors to join the Private Credit Revolution, where stability, returns, and strategic partnerships converge to unlock unparalleled opportunities. Let Sortis Capital be your guide in navigating this new frontier of finance—where every investment decision is grounded in expertise and driven by opportunity.