Private credit is no longer a niche funding option—it’s now a major player in real estate finance. Over the past decade, I’ve seen firsthand how private credit has transformed from a supplemental source of capital into a central piece of the financing puzzle, especially in commercial real estate. For real estate lawyers, this shift isn’t just interesting—it’s essential. Understanding private credit’s role, its unique dynamics, and its impact on deal structures is now a core part of representing clients effectively.
As someone who has structured, negotiated, and closed over $2 billion in real estate transactions, including during my time at SomeraRoad and several major law firms, I’ve seen how private credit has reshaped the lending landscape. Here’s what real estate attorneys need to know as private lenders continue to expand their influence.
What Is Private Credit?
Private credit refers to non-bank lending by private institutions such as investment funds, asset managers, and insurance companies. These lenders operate outside of the traditional banking system and provide debt capital directly to borrowers. In real estate, this often means bridge loans, mezzanine loans, preferred equity, and even senior secured loans.
Why has private credit become so popular? Several reasons: traditional banks are subject to tight regulations that can limit flexibility; private credit funds can move quickly, customize terms, and take on more risk; and institutional investors have poured capital into this space seeking yield in a low-interest-rate environment. Even with rising rates, private credit’s flexibility and responsiveness make it a go-to source for many developers and investors.
Private Credit vs. Traditional Lending
For lawyers, it’s important to understand how private credit differs from traditional bank lending—and how those differences impact your legal approach.
- Speed and Flexibility: Private credit deals tend to move faster. Private lenders often make decisions quickly and are less constrained by internal credit committees or regulatory red tape. This means attorneys need to be ready for tight timelines and deal structures that deviate from bank templates.
- Customized Terms: Private lenders are not bound by rigid policies. They’re more willing to negotiate creative deal terms—whether that’s around interest reserves, cash management, or bespoke covenants. As legal counsel, you need to pay close attention to these negotiated provisions, as they can materially impact your client’s flexibility and risk exposure.
- Higher Risk, Higher Reward: Private credit often comes with higher interest rates and more aggressive terms. There may be tighter controls on cash flow, more stringent default triggers, or enhanced lender remedies. Borrowers are often willing to accept these in exchange for speed, certainty, or financing that banks won’t provide. Your job is to help clients understand the trade-offs.
Legal Considerations in Private Credit Deals
With private credit on the rise, lawyers must adapt their approach. Here are key areas to focus on:
1. Intercreditor Agreements
In real estate finance, private credit often sits in the mezzanine or preferred equity slot—below senior debt but above common equity. This means intercreditor agreements are critical. These agreements govern the relationship between senior lenders and subordinate lenders, and they are often heavily negotiated.
Private credit funds tend to push for more rights—on consents, enforcement, and information—than traditional mezzanine lenders. As counsel, you need to be adept at crafting balanced agreements that protect your client while preserving deal viability.
2. Remedies and Enforcement
Private lenders are often more aggressive in protecting their downside. Expect to see more detailed provisions around events of default, cure rights, and remedies—including the right to take control of the asset or entity. In mezzanine deals, this might include foreclosure under the Uniform Commercial Code (UCC), which requires precision and planning to execute properly.
Attorneys should be proactive in flagging these issues, especially for borrower clients who may not fully appreciate the consequences of a minor covenant breach.
3. Structuring Flexibility
Private credit opens the door to creative structures—combining debt and equity features, layering multiple tranches, or including profit participation elements. These hybrid deals demand close attention to securities law, tax implications, and cash flow waterfalls. Don’t assume you’re working from a standard loan playbook—each deal can (and often will) be different.
How Private Credit Impacts Clients
Whether you represent borrowers or lenders, private credit impacts your clients in material ways. For borrowers, it offers access to capital that might not be available from banks—especially for transitional assets, ground-up development, or time-sensitive acquisitions. But it often comes at a higher cost and with tighter controls.
For lenders, private credit offers yield and control—but also greater exposure to asset-level risk. Private lenders typically do more upfront diligence and expect strong legal documentation to manage that risk. As their attorney, you become part of their risk management strategy.
In both cases, your role is to ensure clients understand what they’re signing—and how it fits into their broader business strategy.
Final Thoughts: Embracing the Change
The rise of private credit isn’t a fad—it’s a fundamental shift in real estate finance. As someone who’s worked through cycles of boom, bust, and everything in between, I can say this trend is here to stay. For real estate lawyers, this means adapting our skills, our mindset, and our approach to deliver value in a new environment.
Private credit deals are faster, more bespoke, and often more complex. They require lawyers to be nimble, commercially minded, and deeply engaged in the client’s goals. We’re not just papering deals—we’re helping clients navigate risk, seize opportunity, and achieve outcomes in a competitive market.
The bottom line? If you’re a real estate lawyer today, you need to understand private credit. Because chances are, your clients already do.