Private equity giant KKR has hit a new record loan pipeline of $42B and doesn’t plan on slowing down anytime soon despite volatility from the fallout of sweeping tariffs and high construction costs.

Landlords are struggling to nail down financing as many lenders hold back, and property values are adjusting after the last few years of higher interest rates and the last few months of tariff concerns.

As a result, KKR's private credit commercial loan business is booming, KKR Real Estate Credit’s Matt Salem, Joel Traut and Patrick Mattson wrote in a note Tuesday.

Private credit loans can bring in annual returns of around 12% to 14%, making them more appealing for investors than equities, Salem told Bloomberg. KKR generally lends at 60% to 70% of asset value at floating rates, hedging against inflation and providing enough leeway for the firm to generate returns even if the property incurs losses.

The firm raised $850M in February for a fund that will buy CMBS and back first mortgages secured by U.S. and European assets.

Private credit has acted as a saving grace not just for cash-strapped property owners but for banks and other financial institutions. Those looking to rid their books of troubled commercial loans without experiencing heavy losses are handing them over to alternative lenders.

"I would say private credit has been a backstop to this whole economy. Without private credit, banks would be in real trouble right now,” Peachtree Group CEO Greg Friedman said to Bisnow last month.

Brookfield is another company on a push to expand its private credit business. The company acquired mortgage lender Angel Oak Cos. in April, adding an $18B portfolio to its $317B credit venture.

KKR's private credit push is betting on property demand outweighing supply. High construction and labor costs continue to dwindle the rate of new builds. The drop off in building will raise property values, the firm said.

On the other hand, the firm expressed concerns about tariffs and high inflation affecting their book. Trump’s “Liberation Day” tariffs sent markets spiraling and brought lending to a standstill, particularly for single-asset, single-borrower commercial mortgage-backed securities, which became a CMBS darling in 2024.

SASB securities made up 45% of CMBS debt issuance last year as conduit and agency loans tapered off. But as issuance rose, so did loan delinquencies. They reached 11% at the close of 2024, an all-time high.

KKR plans to keep making deals even as others back away from tariff-driven confusion, KKR Managing Director Julia Butler said at a Bisnow event a week after Liberation Day.

“We're never going to get it perfect, but discipline is not getting scared in uncertain moments, but not getting overly exuberant either. You just have to keep going,” she said.