Asia Pacific debt: non-bank lenders get in on the act

According to JLL Capital Markets data, the amount of dry powder available for private debt investments in the region is rising, driven by the growth in credit opportunities (23%), volatility in public markets (23%) and the higher returns relative to equity investments (13%).

APAC distressed debt is forecast to have the highest returns globally by 2028.

“Due to the end of the cheap-money era, return expectations of private debt is expected to be higher than private equity,” added Ambler. “Regionally, allocations are expected to rise as undervalued opportunities emerge for well-capitalized debt investors.”

Globally, debt strategies account for around 16% of CRE fundraising worldwide and, since the Fed tightened interest rates in the first half of 2022, returns have consistently outperformed equity.

An estimated $3.1 trillion worth of real estate assets globally have loans due to mature by the end of 2025, providing ample opportunity for investors to capitalise on credit market deals.

“While the majority of these are located in the US, there will be situations where additional capital is needed to maintain stable loan-to-value ratios and service agreements in APAC,” says Ambler.

In Hong Kong, for example, the refinancing gap is estimated at US$12.6 billion, particularly in the residential and office sectors.

"While the majority of these are located in the US, there will be situations where additional capital is needed to maintain stable loan-to-value ratios and interest coverage ratios in APAC,” says Ambler.