Investors

Private credit is not a single strategy; it spans fundamentally different sectors, structures and risk profiles. In Australia, and at MaxCap, the market is primarily focused on a real asset‑backed commercial real estate credit, which is considered a defensive form of private credit that finances the real economy, with loans secured against tangible assets.

Commercial real estate (CRE) credit is lending that is secured against commercial property. It typically funds the acquisition, development or construction of commercial assets such as offices, industrial buildings, retail centres or apartment blocks. In Australia, this type of lending is often called private credit or non-bank lending. Instead of owning the property, investors gain exposure to the loan that is secured by the property

An alternative financier is a lender outside the major banks that provides funding to borrowers. In commercial real estate this usually means a private credit fund, non-bank lender, or specialist debt manager that offers loans secured by commercial property. These lenders often focus on flexibility, speed, and tailored financing structures that banks may not provide.

Australia’s commercial real estate lending market is undergoing a decade-long structural shift from banks to non-bank lenders, driven by regulatory frameworks that incentivise banks to pursue residential mortgage financing while disincentivising development finance. This transformation creates opportunities for sophisticated non-bank lenders to fill the funding gap and support Australia’s critical housing supply needs.

Two primary CRE credit risks are a loss of loan principal and a loss of loan income. The loss of loan principal is the risk that a borrower cannot repay the loan and the security property value declines and is insufficient to meet the full repayment of the loan. The loss of loan income is the risk that cash flow from property or other borrower sources will be insufficient to pay loan interest and fees that are due to the lender. These risks can be managed through prudent loan-to-value ratio (LVR) levels, a strong focus on senior debt, robust covenants, geographic diversification, sector diversification, short loan tenor, and a solid asset management model.

Investors typically access liquidity in private credit through a combination of  fund-level  redemption mechanisms and cash flows generated by the underlying loans. Most private credit funds offer liquidity windows at set intervals (for example, monthly or quarterly) subject to specific terms of the fund. These terms are designed to balance investor liquidity needs with the protection of remaining unitholders and the overall stability of the underlying fund. Liquidity to meet redemptions is primarily sourced from the underlying loan assets, including interest income and principal repayments.

In CRE credit, lenders sit higher in the capital stack than property owners. Loans are secured by the property and supported by the borrower’s equity, meaning that if performance deteriorates, the equity absorbs losses first before the lender’s position is affected. Direct property owners, by contrast, are exposed to the full movement in property values and income, which can make their returns more volatile.

Alternative financiers may charge higher interest rates because they offer borrowers speed of execution, certainty of funding and more flexible loan structures. Because of this, borrowers may be willing to pay a premium for access to these features. These higher interest rates can translate into higher potential returns for investors, reflecting the additional risk and specialist nature of the lending.

The capital stack describes the hierarchy of funding sources and is the order in which different providers of capital are repaid from a property’s income or sale proceeds. In commercial property, it usually starts with senior debt at the top (lowest risk, first to be repaid), followed by junior or mezzanine debt, and finally equity at the bottom (highest risk, last to be repaid). It matters because it defines where each investor sits in the risk and return structure. Those higher in the capital stack have greater security but lower potential return, while those lower in the stack take on more risk in exchange for the possibility of higher returns.

Investing in property credit provides exposure to commercial real estate through lending rather than direct ownership. This structure removes the need to  manage day-to-day property responsibilities such as leasing, capital works or asset management, making it a more passive way to gain real estate exposure. Returns are focused on interest income and are generally less dependent on long-term property value growth.

MaxCap’s investment process is anchored in disciplined credit analysis, robust underwriting and active risk management across each loan. This involves an assessment of the borrower, the asset, the cash flow and the exit strategy, with loans structured to ensure appropriate risk mitigation. Compared to banks, MaxCap can act quickly, apply a more bespoke approach to structuring and focus on individual lending opportunities rather than balance sheet-driven outcomes.