Bridging the Liquidity Gap: A Scalable Investment Strategy in Commercial Real Estate Credit Enhancement
By Conrad Wicker
Real estate is a capital-intensive business and relies heavily on debt. Debt providers, both recourse and non-recourse, generally have minimum net worth and liquidity requirements for their borrowers (among other credit requirements). Conversely, there are many experienced, qualified real estate professionals who understand how to prudently develop and operate commercial real estate assets, and have investors who will back their projects, but do not present an adequate balance sheet to qualify for loans. The infrastructure to help borrowers bridge the gap to qualify for the financial covenants of their loans remains under-developed.
Novel Delivery, not Concept
Amplifi was formed by a team of former commercial real estate bankers to provide a programmatic, institutional solution to this common problem, one that we were seeing frequently in our corporate roles. commercial real estate borrowers were often falling short of lender net worth and liquidity requirements, and, as a result, failing to qualify for loans. Amplifi bridges the gap by co-guarantying non-recourse loans alongside experienced borrowers in exchange for fees and/or profit participation in the underlying properties.
The concept of third-party credit enhancement/support is not a novel one, but the need is being fulfilled mostly by ultra-high-net-worth individuals on a one-off basis. Those ultra-high-net-worth individuals may demand unpredictable economics and are not programmatic providers. Accordingly, Amplifi’s competition is fragmented, non-institutional, and unpredictable. Amplifi’s competitors do not have access to the deal flow that Amplifi sees, given its team’s strong track record and relationships in commercial real estate credit spanning nearly all asset types and geographies. Amplifi’s competitors also often lack the institutional credit and risk management approach that Amplifi employs in every transaction.
Large Market Opportunity
Over $2.8 trillion in commercial real estate loans will mature over the next three years. Many of these loans were originated at lower rates, higher valuations, and looser terms. In the current environment, refinancing requires fresh capital, stronger guarantees, and creative solutions.
An estimated $147 billion market for third-party guarantees exists, yet today this market is fragmented, opaque, and ad hoc. Borrowers often scramble to find high-net-worth individuals willing to co-sign, with unpredictable terms and limited scalability. Amplifi only needs to capture a small portion of this market share to deliver compelling returns to its investors.
A Niche Asset Class: Managed Credit Exposure with Real Estate Alpha
Our investment vehicles are structured as 10-year funds with a 7-year investment period and quarterly distributions. The capital raised is not deployed into real estate deals at the outset, but instead held in liquid, investment-grade securities—primarily short-duration Treasuries. These liquid investments serve as the financial backing for co-guarantee commitments from which the Amplifi generates revenue for its investors.
Returns are driven by a combination of:
• Origination fees for underwriting and issuance of guarantees
• Annual maintenance fees based on the size and duration of the guarantee
• Profit participation in select deals where the platform takes a small equity or promote interest as part of the
compensation package
• Yield from low-risk fixed income holdings
Target returns may include average annual yields in the low-to-mid 20% range with a 3.0x+ multiple on invested capital. Importantly, this is achieved without directly deploying capital into real estate or relying on property appreciation. Capital stays within the four walls of the vehicle unless a loss is incurred or could be incurred—an unlikely outcome given sound risk management controls.
This structure allows for a new type of return profile: one that mirrors the upside of equity, with far more insulation from the downside.
Institutional Risk Management, Purpose Built for CRE Guarantees
Every aspect of the underwriting process is designed to mitigate the potential for liability. Risk is evaluated across four distinct vectors:
1. Project Fundamentals
The first and most important filter is the quality of the real estate project itself. Focus remains exclusively on deals with sound fundamentals, clear exit strategies, and institutional-grade underwriting. Full third-party diligence is conducted, including appraisals, property condition and environmental reports, rent and sale comps, and local market intelligence. Site visits and broker interviews help assess the nuances of each market.
2. Sponsor Evaluation
Borrower integrity, reputation, and track record are critical. This includes background checks, litigation reviews, credit evaluations, and reference calls. Red flags such as failed projects, adverse litigation, or poor reputation are disqualifiers. Indemnification provisions ensure the borrower stands behind any losses incurred due to their conduct.
3. Lender and Loan Terms
Only established institutional lenders with a history of reasonable enforcement and transparent practices are considered. Loan terms are scrutinized for leverage, rate structure, maturity, and covenant risk. Aggressive structures or risky sponsor-lender dynamics are avoided.
4. Guarantee Structure
Non-recourse carve-out language is negotiated with experienced counsel to ensure clarity and limit liability. Each provision is modeled for potential impact, and structures are built with rights to intervene in the event of borrower default. Involvement includes direct notice rights, step-in authority, and the ability to force a sale or restructure to protect exposure.
Downside Protection: Layered and Modeled
Unlike equity or even traditional debt, exposure is not binary. For a credit enhancement vehicle to incur a loss, several unlikely events must occur simultaneously:
The project must experience significant value loss (equity fully wiped out).
The loan must be underwater (debt is impaired).
A carve-out violation must occur.
That violation must directly cause a loss.
The borrower must fail to honor its indemnity.
Amplifi must be unable to step in and cure or restructure the default.
This highly layered model makes loss events both rare and containable. That said, we plan for the worst in our vehicles. We maintain reserves and underwrite a loss provision in our anticipated return analysis.
Even if a loss were to occur, capital remains liquid and exposure is capped to the impairment, not the full loan amount or property value.
Why Capital Allocators Are Taking Notice
For institutional investors, family offices, and sophisticated portfolio managers, this strategy offers a compelling value proposition: differentiated commercial real estate exposure with reduced risk, lower correlation to traditional CRE investments, and high cash-on-cash returns. Effectively earning equity like returns while taking very limited credit risk - lower than traditional private credit.
Unlike equity or debt investments that rely on market timing, cap rate compression, or borrower execution, returns are derived primarily from contractual fee streams and credit enhancement economics. This creates a unique risk-adjusted return profile that complements a broader real estate allocation. It also introduces real estate credit exposure without direct lending or investing risk.
Moreover, because capital is held in liquid securities and only deployed upon specific guarantee triggers, such vehicles maintain a strong liquidity position while still benefiting from the economics of real estate transactions. This makes the strategy especially attractive for allocators seeking capital-efficient alternatives that perform across market cycles.
In an environment where volatility and repricing are disrupting traditional CRE equity and debt strategies, credit enhancement offers a forward-looking, resilient way to stay invested in the space.
Benefit for All Parties Involved
A prudently executed credit enhancement model succeeds because all parties win:
Good borrowers secure the loans they need, without diluting ownership or over-raising equity.
Prudent lenders gain added protection and confidence in their underwriting.
Savvy investors gain access to an innovative yield strategy with controlled downside.
Built by Practitioners
This strategy was conceived by lenders who have been borrowers. We understand the nuances of both sides of the table. We have experience underwriting billions in real estate loans, managing structured credit portfolios, and developing real estate across multiple cycles. This 360 degree perspective informs every element of the approach—from legal architecture to investor reporting.
Conclusion: A New Pillar of Capital Formation
The credit enhancement model is a large market opportunity in an otherwise fragmented marketplace; it is a new pillar of capital formation for commercial real estate. In a time of tightening credit and rising barriers to financing, it offers a bridge—backed by institutional risk management, powered by market demand, and designed to deliver superior returns.
For investors seeking differentiated exposure to commercial real estate with a highly risk-managed, programmatic strategy, this model offers a timely and scalable solution. The capital markets are changing, and those who adapt with innovative solutions will define the next era of real estate investing.
Conrad Wicker
Managing Principal
Amplifi CRE
Amplifi is a middle-market commercial real estate finance and investment company and fund manager. Through niche credit enhancement solutions and strategic co-GP equity investments, we partner with owners and lenders to fill critical needs in the capital stack.
