Lending Where the Banks Won’t Go: What’s Fueling Europe’s Growing Real Estate Private Credit Market?

The dominant media narrative at the moment is direct lending and private credit are virtually synonymous, but that is obviously not how the industry is structured. But what is definitely true is that direct lending has taken the vast majority of capital that's come into the broader private credit space. Institutions have been allocating to the same strategy for quite a long time with a very narrow subset of of GPs who are managing it. And the question is there a broader allocation failure? Is it good that so few managers have had such heavy allocations to such a narrow subset of private credit

This episode is brought to you by Fundrise. Later on, you'll hear more about the Fundrise income fund and why sophisticated investors are turning to higher yielding asset classes like real estate private credit. For now, let's get into today's interview. Welcome to Other People's Money. I'm your host, Max Weathey, and I'm joined today by Thomas Lloyd Jones, cofounder and CIO of London based real estate private credit manager, Zensit Capital. Thomas, thank you for coming on the show.

Thanks very much for having me, Max.

We're gonna be talking a lot about private credit, but that's that's a pretty big asset class that gets painted with a broad brush. So real quickly, in about sixty seconds, at a high level, could you could you tell us what Zenzix specializes in?

Yeah. Opportunistic credit in real estate and asset backed, sectors, principally within lower middle market space, which we define as hold sizes of 50,000,000 and below.

Private credit is is in the news. People are talking about it. It's getting a lot of negative attention from generalists who are largely conflating direct lending with the asset backed lending and and really failing to understand the diversity in the asset class. Can you speak to the current tone of the environment, and where are the true pockets of stress in in direct lending? And is there any of that coming through to to the real estate and asset backed lending that you're doing?

The dominant media narrative at the moment is, as you say, that private or direct lending and private credit are virtually synonymous. But that is, you know, obviously not how the industry the industry is structured. But what is definitely true is that direct lending has taken the vast majority of capital that's come into the broader private credit space. I mean, there's been plenty of statistics that have been passed about recently, but I I think one of the the ones that was most interesting was that something like 80% of all capital that was raised between 2022 and 2026 in private credit wen

Well, there's a saying in the industry that you get the investors that you deserve. And to some extent, the managers that are feeling this most acutely are the ones who saw what was happening, as you said, the amount of money flowing into direct lending. And they said, me over here, we're we're private credit too. And and so what matters is is who are your investors and what is their perception of what you do. And I know that you guys have backing from GCM Grovesner, very, sophisticated, large large pools of capital. So I imagine you're not really having these types of conversations with your

That is the key distinction, I think, between the retail and the institutional investor base because what we've seen in the BDC environment with the redemption requests is I mean, the best way I can sort of describe it almost is a nonbank bank run. You know, it it's it's a level of redemption that probably nobody was nobody was factoring in, but it's that herd mentality, if