Describe the past 12 months in one word, then tell us the key lending opportunities you and your team have uncovered.

Aggressive. There's been more capital in real estate than has been advertised during this cycle. It has seemed more limited because borrowers were struggling with how fast rates reset. With the transactions market largely frozen during the first half of 2024, the deals that were available and attractive were limited and thus had lots of competition. It's taken eight quarters for property valuations to reset, but we believe that a valuation trough has been reached across property types, outside of office. Transactions are now picking up and credit markets have unlocked in significant ways during the second half of 2024. We're seeing strong opportunities across the capital stack and around the world. There are still many interesting opportunities in construction mezzanine financing, but the most compelling deals are now in levered transitional loans — an area that's really ramped up as banks have been expanding into the loan-onloan market.

Are rate cuts the silver bullet the industry has been waiting for to solve all woes?

There's been a major psychological shift in the real estate market that's certainly been more pronounced since the September Fed decision. While this has boosted the market's confidence, rate cuts are a bit of a red herring for the real estate market. Real estate is priced off the 10-year Treasury, and that has been priced in the new cycle for all of 2024 when it settled into what we believe is its long-term range. Fed cuts will affect short-term rates (SOFR), which will help the sector marginally, but the 10-year is much more important for real estate.

How long will nonbank lenders continue to take increased market share?

For the foreseeable future. Nonbank lenders will continue to grow in market share over this next cycle. Private credit entering the real estate ecosystem over the past several years has been very healthy for the market overall, and the dynamic of private credit is not going to end anytime soon. There's much more room for growth and, in fact, we're closer to the beginning of that growth than to the end of it.

How does distress continue to play out in 2025, and how can lenders best protect themselves?

There's still a long recovery for the office sector ahead of us, but outside of office there are green shoots and strength across the industry. When lenders do face challenges in their portfolios, focusing on strong asset management and keeping properties occupied is key. There's almost no bid for empty properties

Who did you lend your very first buck to, and what was it for?

My first buck was lent to Hines for a trophy office building in Atlanta, in a deal that gives me shivers today. How the world changes!

Have you taken any keys back this year?

Far less than we expected 18 months ago. Property cash flows and operations have been resilient, and sponsors have continually stepped up to protect good assets.

Tell us about a deal you're especially proud of this past year.

PGIM Real Estate provided mezzanine construction financing to Mack Real Estate Group for the initial phase of Mack Innovation Park Scottsdale, two buildings comprising 305,400 square feet on a site with capacity for 1.2 million square feet across 11 buildings in an excellent location. The deal was financed through our structured debt strategy, which is a $6.4 billion strategy encompassing both open-end and closed-end vehicles on behalf of third-party investors.