Real estate private credit: an income strategy worth understanding

As wholesale investors look to balance and optimise their portfolios to meet 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. 

Where returns are floating, real estate private credit provides returns that move with interest rates, rising when rates rise and falling when they fall. 

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. 

Ranking also applies within the funding structure for a loan.. Some lending platforms fund their loans partly with senior bank lending and partly with investors’ capital. Where that bank funding is senior, it is repaid first, so investors sit behind it even when the loans are secured by first-ranking mortgages. 

Why it matters: The further back in the repayment queue an investor sits, the more is repaid ahead of them, and the more risk there is to their ability to recover capital if a borrower defaults. This applies both to the ranking of the mortgage security and to where the investors capital sits within the overall loan funding structure. 

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 because the borrower's own equity sits between the loan and any fall in value. At 65% LVR, the property would need to lose more than a third of its value before a sale would fail to cover the loan.  At 80% LVR, that buffer shrinks to one-fifth.  In practice, the actual buffer available may vary depending on the circumstances and costs associated with recovery. 

3. What is the loan secured against? 

Property lenders can take different approaches to the value of the property securing a loan. Some lend against what the property is worth in its existing condition, whether that's a building or land. Others may lend against what a property is expected to be worth once a proposed development is completed. 

Why it matters: If a loan is based on the expected value of a completed development, the lender may be relying on that development being delivered to establish the value of its security. Construction delays, cost overruns or a development that doesn't proceed as planned can leave the lender with a property worth less than anticipated, making it harder to recover the loan if the borrower defaults. 

Lending against a property's existing value avoids reliance on future construction. The security has an assessable value at the time the loan is made, although that value can still change with market conditions. 

4. Diversification 

Lower-risk real estate private credit funds generally 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 loan 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 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. That is a useful test, alongside the fund manager’s own lending experience, credit assessment processes and ongoing oversight of borrowers. 

The Oyster Credit Fund 

The Oyster Credit Fund gives wholesale investors access to a portfolio of short-term loans secured over residential and commercial real estate in New Zealand’s main metropolitan centres. The loans are made by Rockpool Capital, which is owned equally by Oyster and Fortis Capital through Rockpool Holdings.  

Mortgage ranking. Every loan is secured by a registered first-ranking mortgage over New Zealand real estate. Loans can also be funded by a senior bank lender, and the Fund’s investment is subordinated to that lender, which is repaid first. 

Gearing. Maximum LVRs range from 50% to 70% depending on the type of loan, and the portfolio’s weighted average LVR is capped at 65%. 

Asset type. The Fund lends against property valued in its existing condition, rather than its assumed value once a proposed development is completed. It does not provide construction loans, so the security value supporting each loan does not depend on future construction being completed. 

Diversification. No single loan can exceed 15% of the total amount Rockpool Capital has lent, and no single borrower group can exceed 20%. These limits apply from 24 months after its first loan, while the portfolio is being built. 

Governance. Each loan is approved by Rockpool Capital’s investment committee, made up of representatives of Oyster and Fortis. Where the senior bank lender funds a loan, it currently must also approve it. 

Returns. Against this backdrop, the Fund targets a floating return, paid monthly, 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. Returns are driven by the interest paid by borrowers and are not guaranteed. 

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 and “On the Record. Today's private credit opportunity”, BlackRock October 2025. 

WHOLESALE DISCLOSURES.