- 3 days ago
- 5 min read
As wholesale investors look to rebalance and optimise their portfolios to meet the evolving market conditions, real estate private credit as an alternative income option is gaining increasing attention in New Zealand.
What is real estate private credit?
Broadly speaking, private credit refers to loans provided by lenders other than traditional banks.
It's a rapidly expanding market - globally, private credit has grown to around US$3.5 trillion in assets under management, and BlackRock projects it will reach US$4.5 trillion by 2030*.
Real estate private credit is a specific category within that market - non-bank lending platforms providing loans to fund property-related activity, secured against physical real estate across both residential and commercial assets. Borrowers pay interest on the loans, and that interest flows back to investors as income.
Borrowers in this market can typically include developers, real estate investment firms, large private companies and well-capitalised individuals. These are quality borrowers - seeking flexibility, shorter approval timeframes, and bespoke structuring that traditional banks may not be positioned to provide.
In return, the lending platforms - and the investors backing them - earn a premium over cash rates or term deposits.
For wholesale investors, the appeal is straightforward: regular income, shorter investment timeframes than direct property investment, and exposure to real estate without having to take an ownership stake.
Depending on the structure, real estate private credit can also act as a strategic hedge - providing returns that move with market conditions while maintaining a consistent premium to cash rates, meaning investors can benefit in both rising and falling interest rate environments.
Importantly, real estate private credit is not a single product. It covers a broad range of structures and risk profiles. Understanding where any investment opportunity sits on that spectrum is essential.
What to look for - and why
Wholesale investors evaluating any fund should understand five key risk levers - and why each one matters.
1. Mortgage ranking
Where a loan sits in the order of repayment is a major indicator of risk. At the more conservative end, real estate private credit provides access to first-ranking mortgage loans secured against residential and commercial real estate. The loans sit first in line for repayment if the borrower defaults and the security property is sold.
Further along the risk spectrum are second-ranking and mezzanine loans, which generally carry a higher level of risk in exchange for potentially higher returns. Other subordinated structures sit further down again, with returns typically getting higher as the risk profile increases.
Why it matters: The further back in the security queue a loan sits, the more layers of repayment ahead of it - and the more risk to an investor's ability to recover capital if a borrower defaults.
2. Gearing
Loan-to-value ratio (LVR) is another clear risk measure in property lending - it tells you how much of a property's value is being lent against.
Conservative lenders operate with lower gearing - typically capping LVR at 65% or below. Higher-risk, higher-gearing lenders may push individual loans toward 75–80% LVR or beyond.
Why it matters: Lower gearing means more cushion before investor capital is exposed - the borrower's own equity sits between the loan and any market downside. At 65% LVR, the property would need to lose more than a third of its value before the loan itself is at risk. At 80% LVR, that buffer shrinks to one-fifth.
3. Asset type
Conservative lenders tend to lend only against completed assets that can be valued as and where they stand. Higher risk lending strategies can extend into construction lending, speculative land, or development positions where the asset being used as security doesn't yet exist in its final form.
Why it matters: A completed asset has an established value and can be marketed for sale if needed. Construction and development positions carry execution risk - cost overruns, delays, market shifts - and may leave the lender with an incomplete asset that's harder to recover value from.
4. Diversification
Lower-risk real estate private credit funds spread exposure across a diversified portfolio of loans, borrowers, property types, and geographies. Higher risk investment offerings are more concentrated.
Why it matters: Diversification reduces the impact of any single loan underperforming. A concentrated portfolio or a single load can deliver strong returns, but it also magnifies the impact of a single default or market shock.
5. Governance
Some funds and lending platforms will often operate alongside a senior bank lender, who may provide funding into the loan structure and perform independent loan-by-loan due diligence before each loan is approved.
Other structures may rely entirely on the fund's own internal credit team and investment committee, without any external backing.
Why it matters: A senior bank lender at the table is a meaningful governance test - a second, independent pair of eyes on every loan they co-fund. It also signals that the lending discipline meets the standards of a regulated institution.
The Oyster Credit Fund offers income diversification through attractive returns at a consistent premium to cash or term deposit rates.
Oyster Property Group is a New Zealand unlisted property fund and asset manager currently overseeing a diversified portfolio valued at approximately $1.8 billion.
The Oyster Credit Fund gives wholesale investors access to the benefits of well-structured private real estate credit - with an open-ended portfolio of short-term, first-mortgage loans secured over residential and commercial real estate in New Zealand's main metropolitan centres.
The portfolio maintains a loan-to-value ratio of 65% or below. Borrowers hold meaningful equity in every deal - equity that sits ahead of the Fund in any downside scenario. Loans are also secured exclusively against completed assets. No construction loans. No unfinished developments. No speculative positions.
The Fund targets a floating return that is currently around 7% per annum pre-tax, paid monthly. Investor returns are driven by interest paid by borrowers. Investor returns are calculated by adding a fixed 4.5% margin to the 30-day Bank Bill Benchmark Rate (BKBM) - New Zealand's primary wholesale floating rate benchmark.
Senior funding from a leading New Zealand bank adds an additional layer of credit oversight. The bank performs independent loan-by-loan due diligence on every loan it co-funds, before approval.
The Oyster Credit Fund is now open to wholesale investors. To learn more, contact the Oyster Property Group investor team at investor@oystergroup.co.nz.
*IMF Global Financial Stability Report, 2024: BlackRock 2024 & “On the Record. Today’s private credit opportunity”; BlackRock October 2025
WHOLESALE DISCLOSURES.
Investors must qualify as a wholesale investor under the Financial Markets Conduct Act 2013, with a minimum investment of NZ$250,000.
Any offer to invest in the Oyster Credit Fund is made solely under, and subject to, the Information Memorandum, including the risks, terms and conditions described in that document. Prospective investors should read the Information Memorandum in full before making any investment decision.
References to investment returns or capital outcomes are indicative only and not guaranteed. See the Investment Memorandum for further detail.
