Quick Take: Recent headlines have raised concerns about risk and excess in private credit, particularly in corporate direct lending. However, multifamily private real estate credit operates under different structures, collateral and return mechanics. This article explains how the two segments differ and what is driving today’s multifamily credit market. It also discusses why multifamily real estate credit should be evaluated separately from corporate-focused private credit strategies.
Over the past few weeks, a wave of headlines has sparked a new narrative around the private credit market, one of the fastest-growing segments in asset management. The First Brands bankruptcy revealed more than $10 billion in liabilities tied to complex private-credit financing structures. An alleged $400 million in telecom receivables fraud was uncovered by BlackRock’s HPS. And Blue Owl, a major private-credit manager, froze withdrawals in November and canceled a planned merger of two credit funds.
This storyline around potential market stress may be gaining momentum by several things. One is anecdotal reports of firms’ increasing use of bad “payment in kind” amendments that could be masking debt. Others are tougher covenants re-emerging in new deals and private-credit firms expanding their restructuring teams.
Recent comments on a Bloomberg podcast by Jeffrey Gundlach, an influential voice in fixed income and credit markets, appear to underline this narrative. Gundlach, a bond investor and founder of DoubleLine Capital, is not an investor in private credit. But he cautioned that private credit could be the focus of the next financial crisis. He cited rapid asset growth to roughly $1.7 trillion to $1.8 trillion, “covenant-lite” structures, and aggressive underwriting in corporate direct lending.
What is Corporate Direct Lending?
For much of the corporate-focused credit segment, Gundlach’s concerns are valid. But they have intensified scrutiny—and created confusion—around all of private credit. So, it’s important for investors to understand the differences between corporate direct lending and private real estate credit.
Corporate direct lending refers to loans made by non-bank lenders. Private corporate lenders operate as nontraditional lenders and are often part of global private equity or private credit platforms. They provide customized, often higher-yielding loans that can meet a borrower’s specific needs, including flexible repayment timelines and covenants.
These non-bank lenders focus heavily on underwriting financial statements, margins, leverage and quality of management. And the loans typically rely on the stability and growth of the underlying business rather than a physical asset.
How Does Corporate Direct Lending Compare to Private Real Estate Credit?
Corporate direct lending and private real estate credit are both forms of private credit. But they operate differently in terms of repayment, risk profiles and collateral structures. Private real estate credit is secured by tangible, income-producing properties—such as multifamily, industrial or office buildings. This gives lenders a hard asset to fall back on in a downside scenario. Our affiliate company, Origin Credit Advisers, is a private credit fund adviser that focuses on multifamily debt investments.
Yield levels in real estate credit tend to be more consistent and typically lower than corporate direct lending, depending on market and strategy. That’s because the collateral in the deal—tangible real estate—reduces loss severity and provides clearer recovery paths. Real estate credit underwriting prioritizes property-level fundamentals, including rents, occupancy, market conditions and replacement cost.
See how the two types of credit compare below.
Direct Corporate Lending Vs. Commercial Real Estate Private Credit
| Private Corporate Lending | CRE Private Credit | |
|---|---|---|
| Borrower type | Typically lending to small and medium-sized enterprises | Property developers, real estate investors and operators of commercial properties |
| Underlying assets | Loan to corporate entity, occasionally backed by hard assets, but often by factors such as enterprise value, cash flow, performance and profitability | Commercial real estate properties such as office buildings, retail centers, industrial facilities or multifamily complexes |
| Return of principal | Refinancing or sale of the business | Refinancing or sale of property |
| Covenants/credit protection | Tied to financial performance (such as leverage, interest coverage, minimum EBITDA); can be more customized | Tied to property (such as loan-to-value, debt service coverage and occupancy); can be more standardized and anchored in property’s value and income |
| Repayment structure | Typically bullet repayment | Typically bullet repayment |
| Inflation hedge | Higher exposure to borrower operating performance and margin pressures | Returns tied to property income and collateral performance; potential for rent adjustments |
What’s Driving Today’s Multifamily Real Estate Credit Market
The market dynamics of multifamily real estate credit have changed over the past few years. Here’s how:
Property values: Property valuations remain below prior peaks, which affects how leverage is structured in newer loan vintages. According to Green Street’s Commercial Property Price Index, U.S. multifamily property values are approximately 19% below 2022 levels. This has contributed to lower loan-to-value ratios being observed in recent originations.
‘Higher-for-longer’ interest rates. The Federal Reserve recently implemented a third rate cut this year. However, its September 2025 Summary of Economic Projections indicates a longer-run federal funds rate around 3%. This reflects policymakers’ expectations for the policy rate over time. When combined with prevailing spreads in real estate credit markets, these base rates have resulted in higher floating-rate coupons on newly originated senior loans.
Income-driven return structure. The return profile of senior multifamily credit is generally associated with current interest payments rather than changes in property valuations, which can vary over time. Senior real estate loans are typically structured with maturities of three to five years. Repayment occurs through a range of potential outcomes, such as refinancing, property operations, or sale, depending on market conditions at the time.
So, is There a Bubble in the Credit Market?
We can’t speak for other sectors of credit lending. But we don’t believe there is a bubble in the multifamily real estate credit sector. Inflation and rising interest rates, and the rising rents that went with it, brought frothy multifamily valuations to a halt. At this point, the market has mostly absorbed a near-record amount of supply, which is now declining quickly. But there is no matching decline in demand—a key fundamental strength of multifamily. Caution and disciplined risk management will still be required in 2026. But we believe we are entering a new cycle for multifamily real estate (read more about the opportunities we see here).
The Mortgage Bankers Association estimates that $957 billion of commercial real estate loans will mature in 2025 alone, representing about 20% of the outstanding $4.8 trillion in commercial mortgage debt. Borrowers will be seeking loan alternatives in a higher-interest-rate environment. And for well-positioned non-bank lenders, this is setting up to be a strong origination environment.
Despite heightened scrutiny of credit more broadly, it’s important to understand that multifamily real estate credit is distinct from corporate direct lending. It is anchored in hard assets and income derived primarily from contractual interest payments rather than business growth or valuation expansion. These differences do not eliminate risk, but they underscore the importance of evaluating private credit segments individually.
Key Takeaways
- Private credit concerns highlighted in recent headlines focus on corporate direct lending, not all private credit strategies.
- Corporate direct lending relies on business cash flows and enterprise value. Private real estate credit is secured by income-producing properties.
- Multifamily real estate credit is anchored in hard assets. Underwriting is tied to property fundamentals such as rents, occupancy and loan-to-value ratios.
- According to Green Street, U.S. multifamily property values remain about 19% below their 2022 peak, contributing to more conservative leverage in new loan vintages.
- Senior multifamily credit returns are generally driven by current interest payments, rather than changes in property valuations.
- A large volume of commercial real estate loan maturities, including $957 billion in 2025 alone, is creating refinancing demand in a higher-rate environment.
FAQs
What is private credit?
Private credit refers to non-bank lending, where investment managers provide loans directly to borrowers rather than through traditional banks.
Why are some investors concerned about a private credit bubble?
Concerns stem from rapid growth in corporate direct lending, covenant-lite structures, aggressive underwriting, and increased stress in certain corporate borrowers.
What is corporate direct lending?
Corporate direct lending involves loans to private companies, with repayment dependent on business cash flows, financial performance, and enterprise value.
What is multifamily real estate credit?
Multifamily real estate credit consists of loans secured by apartment properties, where repayment is supported by rental income and property-level cash flows.
Does that mean all private credit is risky?
No. Private credit includes multiple segments with different risk profiles, collateral structures and return drivers.
How does multifamily real estate credit differ from corporate lending?
Multifamily credit is backed by hard assets and rental income. Corporate lending depends on business performance and profitability.
How do interest rates affect multifamily real estate credit?
Higher base rates can increase floating-rate loan coupons, while property income and lease structures influence borrower cash flows.
Why is refinancing activity important in today’s real estate credit market?
A large volume of commercial real estate loans are maturing in the coming years. This is creating demand for financing from banks and non-bank lenders.
