About VENTUS
Private Debt
Private debt opens up flexible financing options outside traditional banking structures.
What is private debt?
Private debt, also known as private credit, refers to the provision of debt capital outside traditional bank financing and public capital markets. The capital is generally provided directly by private or institutional lenders and tailored to the borrower's requirements and the specific transaction.
The asset class covers a range of financing structures, including whole loans and mezzanine facilities. A key advantage lies in its high flexibility in terms of structure, term and design of the financing.
In the real estate sector, real estate private debt enables tailor-made financing solutions for acquisitions, developments and standing assets. The financing structure can be aligned specifically with the business plan, the project phase and the individual capital requirement.
How does private debt differ from traditional bank financing?
- Source of capital
Banks fund themselves through regulated deposits, whereas private debt is predominantly provided by institutional capital.
- Speed
Private debt financings can often be structured and executed within a few weeks, while bank processes frequently take more time.
- Structure
Private debt financings can be tailored individually to the specific project and its capital requirement.
- Decision-making
While banks often run multi-stage credit processes, private debt structures allow more direct decision-making paths with few counterparties.
- Loan-to-value
Private debt generally allows higher loan-to-value ratios and therefore greater financing headroom than traditional bank financing.
- Cost
Private debt offers greater flexibility and more financing headroom, but comes with correspondingly higher financing costs.
Financing solutions at a glance
Traditional bank financing
Senior Debt
Senior debt is a first-ranking form of debt financing and often forms the basis of a real estate financing. Because of its senior position, the senior loan is repaid ahead of subordinated lenders in an enforcement scenario and therefore carries a lower risk profile. This is usually reflected in a lower interest rate. Senior debt offers a financing structure that can be planned over the long term and is particularly suited to financing established real estate projects with a comparatively moderate level of leverage.
Our focus
Whole Loan
A whole loan is a debt financing that combines senior and junior capital in a single financing structure. The senior portion forms the first-ranking part and, given its lower risk, typically carries a lower interest rate. The subordinated junior portion bears a higher risk, which is compensated by a higher interest rate. At the same time it enables a higher overall level of financing. By combining both components, a whole loan offers greater financing headroom, an efficient capital structure and a single financing partner.
Why is private debt gaining importance?
Private debt has gained significant importance, particularly since the global financial crisis of 2008/2009. Stricter regulatory requirements, higher capital requirements and tightened lending standards have led banks to act increasingly selectively when financing real estate projects.
This trend is continuing and is being reinforced further by the implementation of Basel IV. Higher capital requirements for certain financings increase the capital banks have to commit and can limit lending capacity, particularly for higher loan-to-value ratios and riskier financing profiles. At the same time, stricter ESG requirements are further restricting the financing options available for certain properties.
This development coincides with a high refinancing need in the real estate market. Under today's requirements, existing financings often can no longer be refinanced at the same level, while simply extending existing loans frequently does not provide a sustainable solution.
The resulting financing gaps create additional room for private debt. Private and institutional lenders can provide financing solutions where traditional bank financing alone no longer fully covers the capital requirement. In Germany in particular, this growing demand meets a private debt market that is still relatively young by European standards, with a limited number of established local providers and corresponding potential for development.
Private debt at VENTUS CAPITAL.
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