Did LP Equity Disappear or Just Move Up the Stack? It didn’t disappear. It moved up the stack. Institutional investors who used to play the LP equity role in CRE have shifted billions into private credit. In a high-rate world, debt offers “equity-like” returns without the messiness of being your partner. The numbers are staggering. Private CRE debt funds have already raised $20B in 2025, the second strongest year on record. Secondary sales of old LP stakes hit $162B in 2024, freeing liquidity. Debt funds are now driving 34% of loan closings, an 89% jump quarter over quarter. Developers haven’t stopped building. They’ve just accepted heavier borrowing in exchange for more control. That shifts risk down the capital stack, not out of the system. Here’s the inversion to keep in mind. LPs think they’re safer in debt, but if deals wobble, those “equity-like” returns can quickly look like equity-like losses. Expect debt first, LP equity later. If you’re raising, structure accordingly. Liquidity is coming. Billions are trapped in bad apartments & office portfolios that will be sold at discounts, freeing capital to redeploy. Cycles always reset. Once stock and credit returns compress, LPs will run back to real estate. The question isn’t whether LP equity returns, but when, and whether sponsors still want them when it does. Great article on Bisnow... https://lnkd.in/e58z8WrX