Alternative Money Manager AB CarVal Investors LP Ramps Up Risky Real Estate Lending
AB CarVal Investors LP, a Wall Street alternative money manager, is making bold moves in the real estate lending sector, targeting areas that are considered too risky by some private credit players. With traditional banks scaling back on lending due to regulatory pressures, AB CarVal Investors LP sees an opportunity in the residential sector, particularly in residential development lending.
Managing Principal Jody Gunderson revealed that the firm is expecting at least $50 billion in deal flow for residential mortgage loans and residential development lending in Europe alone. This presents a lucrative opportunity for the New York-based firm, which manages roughly $16 billion in assets.
AB CarVal Investors LP is utilizing relatively cheaper financing from retreating lenders to make direct loans to the real estate industry. The firm also acquires loan portfolios from banks and can even secure financing from the same banks to purchase assets, helping lenders reduce their exposure to riskier assets and lower capital requirements.
This strategic shift in lending practices highlights the growing role of hedge funds, private credit players, and other money managers in filling the gap left by banks. According to Morgan Stanley Investment Management’s private credit head David Miller, the share of alternative and middle-market lending in Europe has surged from 5% to over 50% in the past decade.
CarVal, founded in 1987 by Cargill Inc. and acquired by AllianceBernstein in 2022, now operates within the parent company’s private alternatives platform managing over $60 billion. The firm has been partnering with large global institutions to originate real estate and consumer finance loans, further solidifying its position in the market.
By collaborating with banks through various lending arrangements, AB CarVal Investors LP aims to capitalize on the evolving landscape of the real estate lending market. Gunderson emphasized the importance of leveraging established relationships with banks and non-bank originators to navigate this structural shift effectively.
With a focus on mezzanine financing for real estate developers in the US, UK, and Europe, CarVal is prepared to tackle the challenges of soaring costs and falling valuations in the sector. The firm’s targeted loan sizes and potential returns in the mid-teens range with leverage demonstrate its commitment to delivering strong results for investors.
As AB CarVal Investors LP continues to invest through its Credit Opportunities interval fund, the firm remains at the forefront of the evolving real estate lending landscape, poised to capitalize on emerging opportunities in the market.
