21-7-2023 (SINGAPORE) JLL, a global commercial real estate services firm, successfully secured a $585m refinancing loan for Five Star Development, a real estate company based in Arizona, via the private credit market. The loan was obtained at an undisclosed spread over overnight rates, potentially making it more expensive than a bank loan or bond. Public debt and loan markets had been averse to funding the project, according to Bryan Clark, JLL Capital Markets’ managing director, who cited lenders’ reluctance to finance construction projects, volatility in debt markets and unwillingness to write a loan of this size.
Private lenders, however, had “significant liquidity” to deploy, making them a good fit for the loan. The private credit market is booming as long-term lenders such as pension funds and wealth managers seek to lock in rich yields, and desperate borrowers are stonewalled by public markets. This includes property developers, privately-held companies and start-ups whose private equity issuance has been stymied by broader stock market swings and the deepening discounts of their valuations. Private lending yields produce a return of about 10% to 18%, typically for a three-year transaction. Asia has also caught onto the trend, with investment firm Muzinich & Co. recently announcing a $500m Asia Pacific private debt strategy.
