What is a NAV facility and how does it work for a CRE fund?

NAV facility structures, eligible portfolios, and pricing

When NAV replaces sub-line: subscription lines work in early fund life when uncalled LP commitments are large. As the fund deploys capital and uncalled LP capacity declines, the sub-line capacity shrinks. NAV facilities take over as the primary fund-level financing source, collateralized by the deployed portfolio rather than the uncalled commitments.

Collateral structure: the lender takes a security interest in the fund's interests in its portfolio investments (typically a pledge of partnership interests in the asset-holding SPEs). The lender does not foreclose on the underlying real property; instead, on default, the lender forecloses on the fund's investment interests in those SPEs.

Advance rate: NAV-facility advance rates run 10% to 25% of NAV, much lower than sub-line advance rates against LP commitments. The lower rate reflects the indirect nature of the collateral and the difficulty of liquidating fund investment positions on default.

Use cases: continuation-fund financing (bridge equity for a continuation-vehicle launch); distributions to LPs ahead of asset sales; tax-related liquidity for LPs; fund-level capex bridge for portfolio company support.

Lender bench: a smaller, more specialized lender options than for sub-lines. Banks active in fund finance plus dedicated NAV-facility lenders (often credit funds and specialty insurance companies) make up the universe. Lender-bake-off process is more important than for sub-lines because pricing variation is wider.

Sponsor playbook: NAV facilities are appropriate in mid-to-late fund life. Engage NAV-lender options 6 to 12 months before expected need. Underwriting takes longer than sub-lines because lender must analyze portfolio composition, NAV-marking methodology, and exit timing.