Key Takeaways
- • Private credit repricing tied to AI disruption fears is concentrated in software and corporate loans, while loans backed by physical real assets such as data centers, offices and apartments have largely performed as expected, according to Bisnow's reporting.
- • BlackRock wrote its roughly $25M loan to e-commerce firm Infinite Commerce Holdings down to zero, the second recent total wipeout in its private credit division, per the article.
- • Debt funds held 13% of the $4.8T U.S. commercial real estate mortgage market at the end of 2024, versus a 9% average from 2015 to 2019, according to Principal Asset Management.
- • Private capital lending to AI firms grew from practically nothing in 2022 to more than $200B, per a January BIS report, which also flagged systemic vulnerabilities from circular AI financing and opaque private credit markets.
- • Tighter spreads and rising competition in real estate lending mean lenders must be more selective, with Northwind Group's Ran Eliasaf noting winners and losers may not be clear for two to three years.
Summary
Public market concern over private credit has intensified as investors reassess exposure to artificial intelligence across the roughly $2T private credit market. Bisnow reports that the selling has centered on corporate and software loans, where repayment depends on borrowers' success against AI disruption. Real estate debt, including loans tied to AI infrastructure such as data centers, is secured by physical assets that lenders can recover if a loan defaults. Private credit stocks have nonetheless fallen alongside real estate brokerages and service companies during the so-called AI scare trade.
The article notes genuine stresses. BlackRock cut the value of its roughly $25M loan to Infinite Commerce Holdings to zero this month, its second recent total write-off in private credit. Bankruptcies of automotive lenders First Brands and Tricolor last year prompted JPMorgan Chase CEO Jamie Dimon to warn of further private credit failures. Blue Owl Capital, a publicly traded lender under pressure over its AI investments, saw its stock wobble after Business Insider reported it had struggled to place debt on a CoreWeave-tenanted data center in Lancaster, Pennsylvania. Blue Owl denied the report and any financing challenges, and separately sold a $1.4B loan portfolio in February to generate liquidity for investors exiting another fund, with a Blue Owl-owned insurance firm in the buyer group.
Capital supply is abundant. Debt funds' share of U.S. commercial real estate mortgage exposure rose to 13% at the end of 2024, according to Principal Asset Management, compared with a 9% average from 2015 to 2019. Loans to AI-related companies make up 8% of outstanding private credit debt, according to the BIS, and roughly 20% of private credit funds now invest in AI-related sectors, up from 5% in 2010. Strong demand for data center and apartment debt has compressed margins and allowed banks to re-enter the market. Eliasaf said spreads have tightened and deal flow has increased. Trepp, meanwhile, tracked wider balance sheet lending spreads on lower-leverage office loans in February.
Lenders acknowledge exposure over the longer term. Eliasaf cited Anthropic CEO Dario Amodei's prediction that unemployment could reach 20% as AI spreads, and said real estate will be affected, with residential assets viewed as more resilient. BridgeInvest, a senior mortgage lender raising a $1B multisector real estate fund, General Counsel Isaac Marcushamer said his firm differentiates itself from corporate private credit and that private credit is not in a worse position than other sectors. Private real estate lenders' shorter loan terms offer some protection against shifts in asset values, and office underwriting faces the greatest sensitivity to AI-driven job displacement. The BIS warned that private credit at AI firms could rise to as much as $600B by 2030.
The article notes genuine stresses. BlackRock cut the value of its roughly $25M loan to Infinite Commerce Holdings to zero this month, its second recent total write-off in private credit. Bankruptcies of automotive lenders First Brands and Tricolor last year prompted JPMorgan Chase CEO Jamie Dimon to warn of further private credit failures. Blue Owl Capital, a publicly traded lender under pressure over its AI investments, saw its stock wobble after Business Insider reported it had struggled to place debt on a CoreWeave-tenanted data center in Lancaster, Pennsylvania. Blue Owl denied the report and any financing challenges, and separately sold a $1.4B loan portfolio in February to generate liquidity for investors exiting another fund, with a Blue Owl-owned insurance firm in the buyer group.
Capital supply is abundant. Debt funds' share of U.S. commercial real estate mortgage exposure rose to 13% at the end of 2024, according to Principal Asset Management, compared with a 9% average from 2015 to 2019. Loans to AI-related companies make up 8% of outstanding private credit debt, according to the BIS, and roughly 20% of private credit funds now invest in AI-related sectors, up from 5% in 2010. Strong demand for data center and apartment debt has compressed margins and allowed banks to re-enter the market. Eliasaf said spreads have tightened and deal flow has increased. Trepp, meanwhile, tracked wider balance sheet lending spreads on lower-leverage office loans in February.
Lenders acknowledge exposure over the longer term. Eliasaf cited Anthropic CEO Dario Amodei's prediction that unemployment could reach 20% as AI spreads, and said real estate will be affected, with residential assets viewed as more resilient. BridgeInvest, a senior mortgage lender raising a $1B multisector real estate fund, General Counsel Isaac Marcushamer said his firm differentiates itself from corporate private credit and that private credit is not in a worse position than other sectors. Private real estate lenders' shorter loan terms offer some protection against shifts in asset values, and office underwriting faces the greatest sensitivity to AI-driven job displacement. The BIS warned that private credit at AI firms could rise to as much as $600B by 2030.
Go deeper than the headline
Research every firm in this story, track the ones that matter and get the daily briefing — free for 7 days.