Invesco REIT Tops $1.4B in Originations, Leans Into Bank Lending Gap

“Our niche is focused on relationship borrowers and originating light transitional loans that are consistent with our property-first approach to lending,” Charlie Rose, president and lead portfolio manager of INCREF as well as global head of credit for Invesco Real Estate, told CO. “We’ve found that our borrowers — the largest institutional owners and operators of real estate in the U.S. — are starting to become more active in acquiring real estate as the bid-ask spread starts to narrow. With the continued pullback from banks in the real estate credit market, we’re able to continue to gain market share, which has led to quarter-over-quarter growth in lending activity for us.” 

Recently closed originations — all senior and floating-rate — include a $47.3 million loan for the acquisition and lease-up of a 258,506-square-foot industrial property in Orange County, Calif.; two loans totaling $46.2 million to refinance two multifamily properties in the Dallas-Fort Worth area; a $40.7 million loan for the purchase and renovation of a garden-style apartment complex in Plano, Texas; a $40.4 million loan for a mid-rise multifamily property in Jacksonville, Fla.; and a $33.5 million loan for the acquisition of a low-rise apartment complex in the San Francisco Bay Area. 

With transaction activity bubbling along pretty nicely this quarter following a sluggish 2023, INCREF is meeting the demand of borrowers in the market who are now ready to hit “go” — encouraged by the bid-ask spread finally narrowing and murkiness around the underlying value of commercial real estate finally clearing. 

Simultaneously, real estate credit is becoming an increasingly attractive space for investors — currently sitting on record-high levels of dry powder — to put dollars to work. 

“Investors continue to seek attractive opportunities in credit positions in the capital stack — particularly secured real estate loans which benefit from the broader attractiveness of private credit and the security of a hard asset during a time of a particularly attractive entry point,” Los Angeles-based Rose said. “On the other side, from a deployment perspective, we’re the beneficiary of the gap left in the market by the retrenchment of the banks.” 

Real estate credit hasn’t always been accessible to the majority of investors, but vehicles like INCREF are now bringing private real estate credit to high-net-worth and retail investors, while investors more broadly are increasingly understanding the benefit of private real estate credit in a diversified portfolio. Private real estate credit has a very low correlation to other fixed-income alternatives, a very low correlation to equity but, perhaps surprising to many, also a low correlation to real estate equity.

Diligence is everything in uncertain markets but INCREF’s “property-first” approach means it’s lending on the asset classes around which it has the strongest conviction, but also underwriting the collateral supporting each loan as if it were buying the real estate — with that same level of scrutiny and analysis. 

Outside of the multifamily and industrial loans it’s busy adding to its portfolio, INCREF is  finding “attractive, risk-adjusted returns at a more limited scale” in some specialty asset classes, including industrial outdoor storage, single-family rentals and age-restricted housing. It’s also eyeing increased activity in Europe, which Rose noted is a market “even more dominated by banks, and historically less well served by alternative lenders.” 

“The origination of well over a billion dollars in loans since INCREF’s inaugural origination in May 2023 marks an important milestone for this strategy,” Bert Crouch, CEO of INCREF and head of North America for Invesco Real Estate, said in a statement. “Invesco Real Estate’s expertise and relationships position us favorably to source and underwrite loans that are accretive to our strategy. We look forward to continuing to work with our trusted borrowers and partners.”

Cathy Cunningham can be reached at ccunningham@commercialobserver.com.