Access to 
Commercial 
Real Estate
Debt

COMMERCIAL REAL ESTATE DEBT

Commercial real estate debt has been a part of the US investment universe and institutional portfolios for many decades. It is a large and diverse market that offers non-correlated returns and therefore excellent diversification.

Valvest specialises in US bridge loans, a specific segment of the broader CRED (Commercial Real Estate Debt) market, which typically have maturities of 12–48 months and are made to real estate investors to bridge a period in which a property is in the process of stabilising. Valvest focuses particularly on professional, commercial borrowers who have pricing power.

US Bridge Loans are characterised by the following features:

• Attractive risk-adjusted return from interest payments on the mortgage loans
• High security through a 1st ranking senior mortgage on a prime commercial property
• Structural credit enhancement through the borrowers' equity cushion
• No duration risk – the loans in the fund are structured as floaters and benefit from rising interest rates
• High diversification potential in the overall portfolio due to the low correlation to other asset classes

INVESTMENT OPPORTUNITY

While the economy is slowing, demand for housing, warehousing and logistics, and travel remains robust. Even though rising interest rates are putting pressure on capital markets, major price corrections for commercial properties are not expevted in prime locations. Commercial real estate and multi-family properties will continue to yield returns that can compete with inflation – one of the few asset classes that can exhibit this characteristic.

In general, the property owner benefits from the excess income and appreciation of the property, but also bears the highest risk of loss. For holders of senior mortgages, the returns are limited to the interest income of the mortgage issued, but they bear the smaller risk of loss. Thus, first lien mortgages have become much more attractive in the current environment.

At Valvest, we work with local experts to identify unique investment opportunities that are not dependent on market movements. Such interesting opportunities typically arise from idiosyncratic or event-driven catalysts, such as loan maturities, lease expirations or repositioning of commercial properties. We believe that short-dated mortgages are an appropriate investment in a disruptive economy where the functionality and desirability of buildings change frequently and require repositioning. At this stage, the building value is already significantly reduced, and together with the equity of the real estate investor, minimises the real estate price risk for the mortgage lender. In our view, this is the ideal time to finance an experienced real estate investor.

The current environment for mortgage lenders is very exciting as an attractive spread over SOFR can be achieved with low risk. This with a defensive bias, no directional bet and regardless of the macro situation.

Fund investors receive constant returns and this with full transparency and monthly liquidity.

VALVEST PLATFORM

Valvest has built a unique platform with local experts to independently and quickly assess local mortgage lending. Only senior mortgage loans for commercial properties in prime locations are granted to professional real estate investors. The structured investment process focuses on the prudent achievement of attractive, risk-adjusted returns and primarily serves the interests of investors. These also benefit from the certainty that all parties are financially involved and thus have a vested interest in the investment success of the fund investors (skin-in-the-game):

• borrower (real estate investor) would lose its contributed equity if interest payments were not met
• originator holds a stake in the mortgage (subordinated to the fund) and would lose it if it did not take over the property
• anchor investor is Denise Rich's family office, which holds a significant investment in the fund

FUND

Valvest's regulated investment opportunities give investors outside the US access to US bridge loans, a specific segment of the large CRED (Commercial Real Estate Debt) market. For conservative investors, Valvest's funds offer an investment opportunity with a very attractive risk-return profile and the investment approach has proven to be very successful. Since the fund's launch in July 2016, 40 bridge loans with a volume of USD 450 million have been issued. No defaults have occurred and all current loans are being serviced.

PRIVATE CREDIT ASSET MANAGER

Valvest is a private credit asset manager with a clear focus on US bridge loans, a specific segment of the broader CRED (commercial Real Estate Debt) market. Through Valvest's private market investments, investors also gain access to this attractive investment segment outside the US. For conservative investors, Valvest funds are an investment opportunity with a very interesting risk-return profile.

Valvest has built a unique platform with local experts to independently and quickly assess local mortgage lending. Only senior mortgage loans for commercial properties in prime locations are granted to professional real estate investors. The structured investment process focuses on the prudent achievement of attractive, risk-adjusted returns and primarily serves the interests of the investors.

TRANSPARANCY

The investment process is just as important as the investment itself. Valvest ensures transparency in every transaction so that all parties involved as well as investors are well informed and all interests are aligned. Honesty, reliability and a consistent focus on client needs are key ingredients in everything we do. Valvest strives for long-term and trusting relationships with clients and business partners.

EXPERIENCE

The Originating Team has over 30 years of real estate development and financing experience and has originated more than $1 billion in senior mortgage loans throughout the United States. This extensive experience in real estate development is used to independently and quickly assess the feasibility of real estate projects. In addition, project plans are validated by market data, extensive property and borrower research is conducted, market participants are interviewed, professional third-party reports are analysed and site visits are held. Due diligence is performed by specialists with proven experience in their field, such as Newmark Knight Frank, CBRE, Fox Rothschild, Fidelity National Title, etc.

NETWORK

Due to the long-established network, investors benefit from a large pipeline of investment opportunities from real estate developers across the US. As a result of the long, successful track record, many brokers and borrowers are repeat clients, ensuring a steady deal flow and increasing the likelihood of quality loans with proven borrowers.