Prospect Credit REIT Generates 13.2% Annualized Return Over 18 Months Since Inception
A ramped portfolio of stabilized multifamily preferred credit investments, a 13.2% annualized total return since inception, and no fund-level leverage.
The First Eighteen Months
Prospect Credit REIT, LLC (“PCRED”) has ramped a portfolio of stabilized multifamily preferred credit investments, generating a 13.2% annualized total return since inception.¹ PCRED closed its first investment in February 2025 and has since grown its gross asset value to $44.3 million. PCRED’s current shareholder cash distribution annualized rate is 9.0%, which equates to 9.5% on the initial offering price.² The portfolio currently includes multifamily investments in the NYC Metropolitan Statistical Area (“MSA”) as well as in Scottsdale, AZ.
Over this period, the benchmark FTSE Nareit Mortgage REITs Index returned roughly 7.0% on an annualized basis. PCRED outperformed the index by 625 basis points over that period, and by 392 basis points over the trailing twelve months.⁵ Investors in PCRED benefit from attractive risk-adjusted returns on stabilized, cash-flowing multifamily assets at a weighted average 69.3% LTV (31% junior capital underneath PCRED) across the portfolio.³
PCRED has produced a positive total return in every month since inception, and every distribution paid to date has been covered by cumulative net investment income. No offering proceeds or borrowings are being used to fund distributions, and no fund-level leverage is being used to enhance returns.⁴ As an incentive for early participation, the fund is currently offering a limited number of Class F interests that have no management or performance fees attached for the life of such investment.
Performance
PCRED’s return profile is driven by a combination of current and accrued interest in its investments, without relying on capital appreciation. PCRED’s current investments carry a weighted average total coupon of approximately 12.5%. Adding origination and exit fees brings the weighted average total contractual return to 13.9%, the figure shown at right.⁷ This structure produces the monthly consistency shown below.
12/16/2024 to 7/31/2026 · PCRED ahead by 625 bps annualized over the same period
As of 7/31/2026. The index since-inception figure is annualized from index inception on 12/31/1971 and is not a like-period comparison. Over PCRED’s 12/16/24 to 7/31/26 life the index returned 11.9% cumulative and 7.0% annualized, placing PCRED 965 basis points ahead cumulatively and 625 basis points ahead annualized.⁵
PCRED invests preferred equity in stabilized multifamily assets that are recorded at the lower of amortized cost or impaired value and are not subject to frequent mark to market volatility.⁶ Index constituents are publicly traded and repriced daily. PCRED investors may experience less volatility than what accompanies publicly traded vehicles based on its structure and 0% fund level leverage.
Quarter-end, 12/31/2024 to 6/30/2026 · Class F
What PCRED Invests In
PCRED primarily originates credit investments collateralized by stabilized, cash-flowing U.S. multifamily assets. All current investments are structured as preferred credit investments benefiting from low-leverage agency senior loans and structured with a fixed coupon plus robust enforcement rights.
PCRED’s strategy avoids fund-level leverage but utilizes structural property-level financing from Freddie Mac. At a detachment point of 69.3% Loan to Value (LTV), an owner’s equity would have to be fully impaired, reflecting a decline in value of approximately 30%, before PCRED’s principal would be impaired.³ PCRED’s stabilized investments have in-place cash flow and generally demonstrate lower default risk than transitional or opportunistic investments.
PCRED adheres to the merits of Hard Asset, Low Obsolescence (“HALO”) lending. Apartment buildings are costly to develop and build, with useful lives measured in decades: 42% of the U.S. apartment stock in service today was constructed before 1979.¹⁰ As AI- driven disruption impacts many other industries outside of residential real estate, we believe real estate credit investments collateralized by physical, income-producing housing assets will be far more difficult to disrupt, given the critical infrastructure nature of such assets.
The GSE Opportunity
PCRED’s positioning behind Freddie Mac and Fannie Mae senior debt (Government Sponsored Enterprises) is a key differentiator and difficult to replicate. Prospect Real Estate has an established GSE borrowing history, which enabled PCRED to obtain approval to provide debt-like preferred equity financing behind Freddie Mac, a status that requires sponsor- and program-level qualification. GSEs remain the largest multifamily lender at 39% of first-half 2026 U.S. origination volume.¹¹ GSEs lend on stabilized and seasoned assets to experienced sponsors within a disciplined underwriting framework, and their reported delinquency rates have run near 0.4%, well inside the average for the securitized market since May 2008.¹² We believe agency eligibility is itself a quality screen, helping filter PCRED’s pipeline toward stronger collateral and sponsors.
Building the Portfolio
Between inception in December 2024 and August 2026, PCRED reviewed over 300 investment opportunities representing approximately $19.5 billion of transaction value. Those opportunities spanned more than 85,000 apartment units, 125 metropolitan areas, 36 states and 200 distinct sponsors. Of those opportunities, Prospect has committed to a selected number that met PCRED’s investment standards, or about 1% of the total reviewed.¹³
12/16/2024 to 8/13/2026 · $19.5B of transaction value screened · $40.9M committed
Current Portfolio Investments ¹⁴,¹⁵
588 units | Stabilized multifamily, built 2007 | New York–Newark–Jersey City MSA
$18.0M
12.75%
9.25% / 3.50%
$269.7M
73.4%
6.8%
193 units | Stabilized multifamily, built 2018 | New York–Newark–Jersey City MSA
$10.9M
12.25%
7.50% / 4.75%
$115.0M
76.3%
7.1%
356 units | Stabilized multifamily, built 2021 | Phoenix–Mesa–Chandler MSA
$12.0M
12.50%
8.00% / 4.50%
$172.4M
58.4%
7.0%
The Market Backdrop
1. In high-yield real estate debt, we believe multifamily assets and subordinate debt performance stand out
In Giliberto-Levy’s high-yield CRE index (“G-L 2”) from 2010 through 2025, cumulative credit loss on multifamily collateral was 0.08%, with a 0.47% default rate by invested dollars. Giliberto-Levy’s summary by property-type shows that multifamily losses tend to be less frequent and less severe. The comparable figures for other asset classes were a 3.01% credit loss rate for office, 2.25% for lodging, and 2.02% for retail.¹⁶
Giliberto-Levy High-Yield Real Estate Debt Index (G-L 2), 2010 to 2025, by invested dollars · Default rate at right
Giliberto-Levy also calculated fully realized internal rates of return on 642 G-L 2 loans with complete cash flow histories from funding through disposition, representing more than $35 billion of principal. The average IRR was 10.6%, while mezzanine debt returned 11.9%, reinforcing the potential value in subordinated debt investments. When assessing realized IRRs of the aforementioned 642 G-L 2 loans by property type, again, multifamily demonstrated relative strength, returning 11.7%, the highest of any major property type.¹⁶
642 fully realized G-L 2 loans, 2010 to 2025, more than $35B of principal · Loan count at right
Fundamentals for multifamily assets tracked by Giliberto-Levy were strong as well. Cumulative net operating income change from origination through year-end 2025 was positive for multifamily in every vintage year measured, including 20.3% for 2022 and 10.1% for 2023.¹⁶
Although Giliberto-Levy noted that apartment deals underwritten at the market peak continue to have underlying credit issues, PCRED originated its entire portfolio in 2025, three years after the peak in valuations.
2. Stabilized vacancy continues to tighten
Stabilized multifamily vacancy has tightened for six consecutive months to 4.4%, even as overall vacancy has inched up.¹¹ Softness in the multifamily market is concentrated in lease-up and transitional assets competing against a delivery wave of new apartment supply, while stabilized and seasoned assets with a diversified in-place rent roll are continuing to tighten. PCRED’s portfolio of stabilized assets stands to benefit from this trend.
3. Rates remain elevated
At the June 2026 meeting, the FOMC’s median projection put the federal funds rate at 3.75% to 4.00% by year-end 2026, a 25 basis point increase from the current 3.50% to 3.75% target range and a reversal of both the March 2026 and December 2025 projections, each of which had penciled in cuts. SOFR stood at 3.63% and the 10-year Treasury at 4.65% as of mid-August 2026, with the 10-year roughly 47 basis points higher than a year earlier.¹⁷ Higher-for-longer rate projections tend to push borrowers toward low-cost agency financing.
Looking Ahead
PCRED is seeking up to $100 million in its private offering, with a minimum $10 million commitment from Prospect and its affiliates maintained until PCRED reaches $500 million of aggregate contributions. Class F private offering investors pay no base or performance fees for the life of their investment, and the Advisor is currently bearing organization and offering (“O&O”) as well as operating expenses, subject to reimbursement.
In an elevated rate environment, PCRED intends to continue to originate preferred equity investments behind agency senior loans on stabilized multifamily assets.
As $757 billion of multifamily loans mature between 2026 and 2028,¹⁸ PCRED sees a broad opportunity to provide financing to recapitalize higher-quality multifamily assets going forward.
For more information, contact PCRED Investor Services at investorservices@pcredreit.com.
FUND HIGHLIGHTS
As of 6/30/2026
As of 6/30/2026
As of 6/30/2026
Through 7/31/2026
Per annum, paid monthly
12/16/24 to 7/31/26
As of 6/30/2026 unless otherwise noted.
PCRED outperformed the FTSE Nareit Mortgage REITs Index by 625 basis points.⁵
Since-Inception Total Return¹
Performance data above represents past performance. Past performance is not indicative of future results. Current performance may be lower or higher than the performance data stated above, and investment returns and principal value will fluctuate. Please see Important Disclosures and Endnotes for further information.
Detachment, on appraised value
As of 6/30/2026 unless otherwise noted.
Pipeline Since Inception
12/16/2024 through 8/13/2026.
Excludes common equity. See endnote 13.
IMPORTANT DISCLOSURES
PAST PERFORMANCE
The performance data quoted herein represents past performance as of 7/31/2026. Past performance is not indicative of future results. Current performance may be lower or higher than the performance data quoted. Returns and distributions are not guaranteed. Investment returns and principal value will fluctuate.
RISK FACTORS
Investing in the Fund during a private placement is speculative and involves a high degree of risk, including the risk that you may receive little or no return on your investment or that you may lose part or all of your investment. A private placement has a relative lack of liquidity and is suitable only for persons of substantial financial means who have no need for liquidity. There can be no assurance that PCRED’s investment objective will be met. An investor should carefully consider the fees and expenses, and other information found in the PPM, including the “Risk Factors” section, before making an investment decision. These risks include, but are not limited to, the following. No public market currently exists for our Class F interests and we have no current plans to list them on a national securities exchange. We have a limited operating history. We established the initial offering price of our Class F interests arbitrarily and this price is unrelated to the book or net value of our assets or to our expected operating income. We may return a portion of your capital if our Advisor is unable to quickly identify suitable investments or if such investments do not generate sufficient cash to make anticipated distributions. If we raise substantially less than the maximum offering we may not be able to invest in a diversified portfolio of investments and your investment will be more susceptible to fluctuations in the values of specific individual investments. We have no employees and are dependent upon our Advisor and its affiliates. Our officers, directors, and the officers and employees of our Advisor and its affiliates may have substantial conflicts of interest because they also serve similar programs sponsored by our Sponsor. We will pay certain fees and expenses to our Advisor and its affiliates, which may increase the risk that you will not earn a profit on your investment. The income from any of our investments will be dependent on the ability of our Advisor to successfully manage such investments. If we do not qualify as a REIT we will be treated as a corporation for federal income tax purposes. Our Advisor may face conflicts of interest relating to the purchase of investments and such conflicts may not be resolved in our favor. There are limits on the ownership, transferability and repurchase of Class F interests.
REAL ESTATE RISK
A number of factors may prevent PCRED’s investments from generating sufficient net cash flow or may adversely affect their value, or both. These factors include, but are not limited to, national economic conditions, regional and local economic conditions, local real estate conditions such as over-supply of or insufficient demand, changing demographics, perceptions by prospective tenants of the convenience, services, safety and attractiveness of a property, the ability of property managers to provide capable management and adequate maintenance, the quality of a property’s construction and design, increases in costs of maintenance, insurance and operations, changes in applicable laws or regulations including tax laws, zoning laws or building codes, potential environmental and other legal liabilities, potential instability, default or bankruptcy of tenants in the properties collateralizing PCRED’s credit investments, and the relative illiquidity of real estate investments in general. Many competitors are not subject to the operating constraints associated with REIT compliance.
DISTRIBUTIONS
Distributions are not guaranteed and may be modified at the discretion of the Board of Directors. Any future distributions may exceed our earnings, and therefore portions of a distribution may represent a return of the money that you originally invested and a return of capital for tax purposes. All distributions paid to date have been covered by Net Investment Income.
INDEX INFORMATION
Indices are unmanaged, do not reflect the deduction of fees or expenses, and cannot be invested in directly. There are meaningful differences between an investment in PCRED and the constituents of any index shown, including differences in costs and expenses, liquidity, leverage, valuation methodology, guarantees or insurance, fluctuation of principal or return, and tax features. Index periods shown may differ from PCRED’s reporting period and are labeled accordingly.
THIRD-PARTY INFORMATION
Prospect cannot guarantee that the information herein is accurate, complete or timely. We make no representation or warranty in respect of any information derived from third-party sources which has not been independently verified. Any portfolio characteristics shown herein, including position sizes and sector allocations, among others, are general averages for illustrative purposes only and do not reflect the investments of an actual portfolio, unless otherwise noted herein.
FORWARD LOOKING STATEMENTS
Certain statements made in this letter that relate to future plans, events or performance are forward-looking statements within the meaning of the federal securities laws. Forward-looking statements predict or describe future operations, financial outlooks, business plans, business and investment strategies, portfolio management, and the performance of investments. Such statements are based on current expectations, estimates, forecasts and projections and are not guarantees of future performance. Such information is based upon certain assumptions about future events or conditions and is intended only to illustrate hypothetical results under those assumptions. The value of investments can go down as well as up. All statements and assumptions included in this letter are based upon current market conditions as of the date of this letter and are subject to change. Forward-looking statements involve a number of risks and uncertainties including, but not limited to, the risks described in the PPM. All forward-looking statements are qualified by the PPM. Forward-looking statements in this material speak only as of the date on which such statements were made and neither Prospect nor PCRED undertakes any obligation to update any such statements that may become inaccurate due to subsequent events.
Endnotes and Sources
- Returns as of 7/31/2026. Returns reflect compounded, annualized distributions plus NAV growth since inception on 12/16/2024. Total return reflects distributions paid plus the change in NAV from investment operations, divided by NAV attributable to new subscriptions. Cumulative total return since inception is 21.54% and the trailing twelve month return is 13.23%, each through 7/31/2026. Past performance is not indicative of future results and returns are not guaranteed.
- Distribution rate per annum is calculated as total per-share distributions divided by the most recent quarter-end NAV per share of 6/30/2026. The 9.53% figure is the same distribution measured against the $25.00 initial offering price. All distributions to date have been covered by Net Investment Income. Distributions are not guaranteed and are intended to be paid monthly as authorized by the Board of Directors. Distributions may be modified and may include a return of capital.
- Loan-to-value (“LTV”) is the average of PCRED’s last dollar basis in each portfolio investment divided by the latest appraised value of the subject investment collateral as of the reporting date. LTV shown is a detachment point, meaning the last dollar of PCRED’s position, and is measured against appraised value rather than cost.
- PCRED employs no fund-level leverage. Each investment sits behind property-level, non-recourse senior financing incurred by the borrower, which is not an obligation of PCRED. As of 7/31/2026 no borrowings have been made at the fund level.
- The FTSE Nareit Mortgage REITs Index is an unmanaged, market-capitalization-weighted total-return index of U.S. exchange-listed mortgage REITs. It is shown because it is the closest public-market proxy for PCRED’s strategy, as no index of non-traded U.S. real estate credit exists. Index constituents are publicly traded, marked to market daily and generally more leveraged than PCRED, so the comparison is directional only. Index data per Nareit as of 7/31/2026. The index since-inception figure is annualized from index inception on 12/31/1971 and is not a like-period comparison; over PCRED’s 12/16/2024 to 7/31/2026 life the index returned 11.89% cumulative and 6.97% annualized. Basis point differences are stated against those like-period figures. Indices reflect no fees or expenses and cannot be invested in directly.
- Net asset value (“NAV”) is determined as of the last calendar day of each quarter by Prospect Credit REIT Advisor, LLC in accordance with PCRED’s valuation guidelines. NAV is a non-GAAP financial measure and there is no regulation or industry practice that requires that NAV be calculated in a certain way. Investments are held at the lower of amortized cost or impaired value and are not marked to market, and reported volatility may therefore understate economic volatility. Gross asset value represents total investments plus cash and other assets before liabilities.
- Average total contractual return is the weighted average of the contractual return underwritten at closing for each portfolio investment, inclusive of current pay, accrued interest, and origination and exit fees. Figures are as underwritten and are not a projection of realized results. Actual results will differ.
- Weighted average of the net operating income of each portfolio investment divided by the total debt service of the subject investment collateral in year 1.
- Weighted average physical occupancy of the subject investment collateral as of the reporting date.
- Apartment stock. National Multifamily Housing Council, Characteristics of Apartment Stock, showing 42% of U.S. apartment units were built before 1979. nmhc.org
- Multifamily market data. Newmark Research, “2Q26 U.S. Multifamily Capital Markets Conditions and Trends, Extended” (August 2026), drawing on MSCI Real Capital Analytics, Trepp, MBA, Moody’s Investors Service, NCREIF, Green Street, RealPage, the Federal Reserve and the Federal Reserve Bank of Atlanta. Figures cited include GSE origination share of 39% of first-half 2026 multifamily debt origination volume of $191 billion, and stabilized vacancy of 4.4%, tightening for six consecutive months and unchanged year over year, against overall vacancy inching up. The stabilized versus overall distinction is Newmark’s. Data as of 7/14/2026. nmrk.com/insights
- GSE delinquency. Trepp, January 2026 Market Pulse, reporting Freddie Mac and Fannie Mae delinquency rates of approximately 0.4% against 7.47% across CMBS issuers over the same period. trepp.com
- Pipeline statistics reflect PCRED deal tracker records for debt investment opportunities sourced between 12/16/2024 and 8/13/2026. Common equity opportunities are excluded from every pipeline figure shown. Preferred equity, which PCRED underwrites and holds as debt-like credit exposure, is counted as debt, as are senior loans, mezzanine loans, B-notes and small-balance first liens. Transaction value reviewed reflects the gross capitalization of opportunities screened rather than capital committed. Source: Prospect Capital internal records, unaudited.
- Portfolio investment economics. Contractual current and total pay rates, senior loan terms, closing dates, contractual returns and in-place LTVs are per the Prospect Credit REIT Q3 2026 presentation dated 8/4/2026, pages 22, 24 and 26. Investment terms reflect provisions from the executed joint venture agreement for each transaction. All investment metrics are as underwritten at closing and are not a projection of realized results.
- Appraisals. Skyline, Colliers International as-is valuation of $269.7 million dated 10/22/2025, obtained in conjunction with the Freddie Mac senior loan. The Frederick, Bowery Valuation as-is valuation of $115.0 million dated 10/1/2024. Roadrunner, CBRE as-is valuation of $172.4 million dated 10/15/2024. Loan-to-value figures shown for each investment are measured against these appraised values.
- High-yield real estate debt performance and credit losses. Giliberto-Levy, 2026 High-Yield Real Estate Debt Symposium (6/17/2026). The Giliberto-Levy High-Yield Real Estate Debt Index (G-L 2) is produced quarterly from loan-level data obtained directly from participating lenders; index inception 1/1/2010. The index is unmanaged and cannot be invested in directly, and its constituents include leveraged whole loans, senior whole loans and value-add and transitional collateral that PCRED does not hold. Cumulative credit loss 2010 through 2025 by invested dollars was 1.02% index-wide. By property type, multifamily showed a 0.47% default rate and 0.08% credit loss, against office at 3.01%, lodging at 2.25% and retail at 2.02%. Realized IRRs were calculated on 642 loans with complete cash flow histories from funding through disposition, totaling more than $35 billion of principal and including loans with credit events; the average was 10.6%, with mezzanine debt at 11.9% and multifamily collateral at 11.7%. Cumulative net operating income change from origination through 12/31/2025 was positive for multifamily in every vintage measured, including 20.3% for 2022 and 10.1% for 2023 (Giliberto-Levy using NCREIF data).
- Rates. Federal Reserve H.15 Selected Interest Rates, released 8/20/2026 for observation date 8/19/2026, showing a 3.63% effective federal funds rate and a 4.65% 10-year Treasury. SOFR at 3.63% per the Federal Reserve Bank of New York via FRED. FOMC Summary of Economic Projections, June 17, 2026, showing a median end-2026 federal funds rate of 3.75% to 4.00%, reversing the March 2026 and December 2025 medians of 3.25% to 3.50%. federalreserve.gov; fred.stlouisfed.org
- Maturities. $757 billion of multifamily loans mature between 2026 and 2028. Banks hold 23% of 2026 through 2034 multifamily maturities but 35% of 2026 through 2028. Debt funds hold 18% near-term against 10% overall, and GSE maturities are heavily back-loaded. Newmark Research, MBA, Trepp and MSCI Real Capital Analytics as of 7/14/2026, adjusted for year-to-date estimated originations.
DEFINITIONS
- Basis Points
- A basis point (“bps”) is a way to show changes in interest rates or yields. One basis point equals one-hundredth of a percentage point.
- Current Pay
- The portion of interest the borrower pays in cash through regular monthly payments.
- Debt Service Coverage Ratio (DSCR)
- DSCR measures a property’s net operating income relative to its total debt service over a given period. A DSCR above 1.0x indicates that in-place cash flow exceeds required debt payments, with higher ratios indicating greater cushion.
- Debt Yield
- Debt yield is a risk metric that measures a property’s net operating income (NOI) as a percentage of the total loan amount. It reflects the lender’s return if they were to take ownership of the property, with higher debt yields indicating lower credit risk. Debt yield is a property-level credit metric and does not reflect a return or distribution from the REIT itself.
- Government Sponsored Enterprises (GSE)
- A Government-Sponsored Enterprise (GSE), Fannie Mae or Freddie Mac, supports the multifamily housing market by purchasing and securitizing apartment loans made by lenders, providing stable, low-cost capital that helps developers and owners finance, preserve, and expand the supply of multifamily housing.
- Hard Asset, Low Obsolescence (“HALO”)
- HALO refers to an investment strategy and business framework focused on investments with substantial physical infrastructure that are difficult to replace or disrupt by new technologies such as artificial intelligence.
- Internal Rate of Return (IRR)
- IRR is the annualized rate of return at which the present value of an investment’s cash inflows equals its cash outflows. Gross IRR is calculated before deducting management fees, fund expenses, and carried interest.
- Loan-to-Value (LTV)
- Loan-to-Value is a metric that measures the size of a loan relative to the appraised value or purchase price of a property. It is expressed as a percentage and used by lenders to assess risk, with lower LTVs indicating more borrower equity and typically safer credit profiles.
- Mezzanine Loan
- A mezzanine loan is a form of subordinate financing that sits between senior debt and the sponsor’s equity in the capital stack. It is typically secured by a pledge of the borrower’s ownership interests in the property-owning entity, offering lenders higher yields than senior loans in exchange for taking on greater risk.
- Net Asset Value (NAV)
- Net asset value (NAV) is the total value of an investment fund’s assets minus its liabilities, usually expressed on a per-share basis.
- Net Operating Income (NOI)
- NOI is a property’s rental and other operating revenue less operating expenses, measured before debt service, capital expenditures, depreciation, and amortization.
- Opportunistic
- Opportunistic investments are typically development projects and distressed assets in high-growth areas. With significant market growth or updates to the property, these investments can provide high returns but require management expertise and are typically riskier.
- Payment in Kind (PIK)
- Interest that is not paid in cash right now. Instead, it accrues and adds to the total principal balance owed by the borrower.
- Preferred Equity
- Preferred equity is a form of financing that sits between senior debt and common equity in the capital stack that provides capital to a project in exchange for a fixed or priority return, with repayment rights that are subordinate to the lender’s but senior to the sponsor’s ownership, often including certain control rights if the borrower underperforms.
- REIT
- A REIT (real estate investment trust) is a company that owns, operates, or finances income-producing real estate across various sectors. Structured to avoid corporate income tax, REITs must distribute at least 90% of their taxable income to shareholders as dividends.
- Secured Overnight Financing Rate (SOFR)
- SOFR is a benchmark interest rate for dollar-denominated loans and derivatives. It is based on transactions in the U.S. Treasury repurchase market.
- Stabilized
- A stabilized asset is one that has completed lease-up and is operating at a normalized occupancy and expense level, with a diversified in-place rent roll supporting current cash flow.
- Value-Add
- Value-add investments involve assets that are often older, usually require sizable expenses such as renovations or operational enhancements, and often have high vacancy rates.
- Volatility
- Measures how much and how fast a security’s price swings around its average. It does not indicate the direction of the price, only how unstable or unpredictable the movements ar