The Quiet Foundation of Real Estate Credit: The Rise of Lender Finance and Family Offices

Over the past decade, the commercial real estate credit ecosystem has undergone a quiet transformation and an expansion. Traditional banks, once the primary source of liquidity for CRE debt markets, have steadily pulled back in response to regulatory pressure and shifting capital reserve requirements, creating significant demand for private credit.

Private credit funds, nonbank lenders and family offices are not just financing real estate directly. They are financing the financiers. In a market defined by rising rates and spread compression, many first-lien credit funds and private lenders now rely on lender finance facilities such as credit lines and note-on-note structures that allow them to extend more loans, enhance returns, and diversify portfolios. This financing dynamic has quietly become one of the most powerful growth engines in commercial real estate debt.

Greenwich-based Lancewood Capital has emerged as a key participant in the lender finance space, closing more than $300 million of lender finance investments in the past 12 months and providing more than $1 billion in senior CRE credit investments since inception. Recent transactions include a $50 million credit facility for a New York-based credit fund, a $45 million facility for a Florida-based credit fund, a $40 million facility for a California-based credit fund, and over $100 million of one-off note-on-note investments. The underlying first-lien commercial loans, which are in the $5 million to $75 million space, are secured by multifamily, mixed-use, light industrial, retail, and single-family residential properties in major U.S. markets.

Lancewood currently provides senior note financing to more than 30 first-lien CRE lenders and note buyers, offering leverage on both performing and nonperforming loan portfolios. It is a business that has historically been conducted by banks but is now increasingly supported by competitively priced alternative credit providers.

According to Justin Godner, co-head of real estate credit at Lancewood Capital, the disruption in traditional banking and the preference among sponsors for more flexible and reliable capital has created meaningful opportunity for private credit providers. Simultaneously with the expansion of private credit has been the expansion of lender finance, as many of the first-lien CRE lenders procure financial leverage from banks or firms like Lancewood.

“Market conditions and borrower preferences have allowed long-term capital like ours to establish lasting lender finance relationships,” Godner said. “We are providing flexible, competitive, and reliable execution to lenders who rely on our senior financing to make their economics work. As spreads compress and benchmarks fluctuate, we believe the need for thoughtful leverage will only continue to grow.”

That observation reflects a broader truth. Leverage is not simply a tool for higher returns; it is a mechanism for liquidity and diversification. As private lenders seek to maintain yield in an environment of margin compression, lender-finance platforms are enabling them to stay competitive and meet borrower demand for speed and certainty.

Family office capital brings an added layer of stability, operating without the short-term fundraising cycles and investing with a long-term horizon. Their patient and relationship-oriented approach allow them to function as a steady source of liquidity throughout the economic cycle.

The result is a new credit hierarchy in which family offices, once peripheral to institutional lending, are now very relevant participants in the financial infrastructure of commercial real estate.

About Lancewood Capital:
Lancewood Capital is a Greenwich, Conn.-based family office specializing in commercial real estate credit. The firm provides senior financing, lender finance credit facilities, and note-on-note investments for alternative real estate lenders and note buyers. With a long-term investment horizon and a focus on relationship-driven execution, Lancewood delivers flexible and competitive financing solutions to first-lien lenders and property owners investing in larger markets across the United States.