Where the yield comes from
CREB is a lender. It pays bondholders a fixed 8.50% APY and lends most of that capital to real estate borrowers through short-term, first-lien bridge loans that currently yield around 11.8%. Here is how the spread works, what could put it under pressure, and how CREB manages those risks.
In this article
The basics: borrow at 8.50%, lend at around 11.8%Who pays around 11.8%, and whyInside a CREB loanThe spread, explained in numbersThe rest of the portfolioWhere the spread goesThe risks to the 8.50%How CREB manages these risksFrequently asked questionsWhen investors first see CREB’s fixed 8.50% APY, the next question is almost always the same: how is that possible? Banks pay a fraction of that on savings. Treasury bills pay less. So where does an 8.50% return actually come from, and how confident can you be that it will keep coming?
This article answers that question in detail.
The short answer
CREB is a lender. When you buy a CREB bond, you are lending money to the issuer at a fixed 8.50%. CREB then lends most of that capital to real estate borrowers who pay higher interest rates, with the loan book currently earning yields of around 11.8%. The difference between what borrowers pay CREB and what CREB pays bondholders is called the spread. That spread is how CREB covers its costs and earns its revenue.
This is not a new or unusual idea. It is the same basic model banks, credit funds and mortgage lenders have used for centuries: borrow at one rate, lend at a higher rate, and manage the risks in between. What CREB does differently is make the lending side of that model available to everyday investors, from $500, without management fees.
But a clear explanation of how the 8.50% is earned must also explain what could put it under pressure. A spread that exists on paper only works if borrowers repay, if enough capital is actually lent out, and if costs stay under control. So in this article we cover three things:
Our aim is to give you a complete picture, so you can judge for yourself whether CREB’s 8.50% makes sense for you.
To understand how CREB pays 8.50%, it helps to follow a single dollar through the system.
Your 8.50% does not rise or fall with the performance of the portfolio. If CREB’s loans earn more in a given month, you do not earn more. If they earn less, you do not earn less. The rate is written into the bond.
That is an important feature, but it is worth understanding what it means in practice. A fixed rate shifts the month-to-month ups and downs of the portfolio onto the issuer. It does not remove them. The issuer’s ability to keep paying a fixed 8.50% over time still depends on the portfolio continuing to earn enough. If the portfolio consistently earned less than CREB owed bondholders, the issuer would have to make up the difference from other resources, and if it could not, payments could be affected. That is why the rest of this article focuses so closely on how the portfolio earns its return.
It can be tempting to think a higher-than-bank rate must involve something exotic. It doesn’t. Banks take deposits, pay depositors a low rate, and lend that money out at much higher rates through mortgages, business loans and credit cards. The difference is the bank’s net interest margin, and it is how banks make money.
CREB follows the same logic, with two key differences:
That second point is the trade-off at the heart of the 8.50%. A higher rate is compensation for taking on risk that an insured bank account does not carry.
If CREB’s borrowers could get a bank loan at 6% or 7%, why would they pay closer to 12%? The answer lies in what CREB lends for: short-term real estate bridge loans.
A bridge loan is a short-term loan, typically with a term of 6 to 12 months, that “bridges” a gap in a property’s financing. Common situations include:
In each case, the borrower’s plan is to repay the bridge loan by refinancing with a traditional lender or by selling the property. That planned repayment route is called the exit strategy.
The biggest reason bridge borrowers pay higher rates is speed. A traditional bank loan for a commercial or investment property can take 60 to 90 days to approve and fund, sometimes longer. Banks require extensive documentation, multiple committee approvals and, often, properties that are already fully leased and stable.
A private lender like CREB can often fund in 5 to 10 days. For a borrower about to lose a purchase opportunity, facing a loan maturity or needing to start work on a project, that speed can be worth far more than a few percentage points of interest over a 12-month loan.
Banks lend against properties that fit their boxes: stabilised buildings, standard property types, borrowers with long track records. Many perfectly sound projects fall outside those boxes for a period of time. A building mid-renovation, a property with a temporary vacancy, or an owner who is between financing arrangements may not qualify for a bank loan today, even if they will in a year. Private lenders fill that gap and are paid for doing so.
For a borrower, paying around 12% for 12 months is a deliberate business decision. The higher cost is temporary, and it allows them to capture an opportunity, complete a project or avoid a forced sale. Once the property is stabilised, they typically refinance into a cheaper long-term loan and repay the bridge lender. That short, purposeful use is what makes the bridge-lending market large and consistent.
Bridge borrowers are paying for speed and flexibility, not because they are desperate. That distinction matters. The speed premium allows CREB to earn interest rates of around 11.8% on its loans while still lending at conservative loan-to-value ratios, which is how the portfolio aims to balance yield with protection.
It is also true, however, that borrowers who cannot get a bank loan today are, on average, riskier than borrowers who can. Some of CREB’s borrowers may have weaker credit or more complex situations, and CREB’s offering circular notes that some loans may be made to sub-prime real estate borrowers. That is part of why underwriting and collateral matter so much, as the next section explains.
A high interest rate is only valuable if the loan is repaid. So the question is not just “what does CREB earn?” but “how does CREB try to make sure it gets paid?” The answer lies in how each loan is structured.
CREB’s real estate lending focuses on first-lien loans. A first lien is the senior claim on a property. If a borrower defaults and the property has to be sold, the first-lien lender is repaid before any junior lender and before the owner receives anything. In a property’s capital structure, the first-lien position is the most protected place to be.
Loan-to-value (LTV) compares the size of the loan to the appraised value of the property. CREB targets LTVs of roughly 50% to 60%, and its 2026 Investor Guide reports a weighted-average LTV of 55% across the loan book as of the first quarter of 2026.
A 55% LTV means that, on average, borrowers have around 45% of the property’s value as their own equity. That equity is a cushion. If a property ever had to be sold, its value would need to fall by roughly 45% before the loan principal itself was at risk, before considering the costs of a sale.
CREB’s loans have a weighted-average life of about 12 months. Short loans have two advantages. First, there is less time for a property’s circumstances to change materially before the loan is repaid. Second, as loans are repaid, capital can be relent at current market rates, which helps the portfolio adjust when interest rates move.
Before a loan is made, it is evaluated against defined criteria, including:
The largest loan in CREB’s portfolio shows how these elements fit together in practice.
This single loan earns 12% interest, which is 3.5 percentage points more than CREB pays bondholders. It is secured by a modern industrial property worth roughly twice the loan amount, and CREB holds the first-priority claim. Over a year, a $12.5 million loan at 12% generates about $1.5 million in interest. Paying bondholders 8.50% on the same $12.5 million would cost about $1.06 million, leaving roughly $440,000 of spread from this one loan.
That is the model working as intended. It also shows why a large loan matters: when one position makes up a significant share of a growing portfolio, its performance has an outsized effect on the whole. We return to that point in the risk section.
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The spread is the difference between what CREB earns and what it pays bondholders. It is the engine of the whole model. To understand it properly, you need to look at it at two levels: the individual loan and the portfolio as a whole.
At the loan level, the math is simple:
On every $10 million that CREB has lent out at 11.8%, it earns about $1.18 million a year in interest. Paying 8.50% to bondholders on that same $10 million costs $850,000. That leaves roughly $330,000 of spread on the capital that is actively lent out.
Here is the part that is easy to miss. CREB pays 8.50% on every dollar invested, but not every dollar is lent out at 11.8%. Part of the portfolio is deliberately held in assets that earn less, mainly Treasury bills and cash, so that CREB can process withdrawals quickly. Those reserves are what make “withdraw anytime” possible, but they earn far less than 8.50%.
That means the spread that really matters is the blended yield across the whole portfolio, compared with the 8.50% CREB owes on all of it.
The example below uses CREB’s illustrative target allocation. The yields for assets other than loans are hypothetical assumptions for illustration only, not reported results:
In this illustration, the portfolio earns about 8.79% against an 8.50% cost, leaving a portfolio-level spread of roughly 0.3 percentage points before operating costs. That is much thinner than the 3.3-point spread on an individual loan.
The single biggest driver of the portfolio-level spread is how much of the capital is lent out at loan-level yields. Using the same assumptions, here is how the blended yield changes as the share of capital in loans changes:
The lesson is straightforward. When a large share of capital is earning 11.8% in performing loans, the model has a healthy margin. When too much capital is sitting in cash and Treasuries, for example because new investor money has arrived faster than new loans can be made, or because reserves have been built up to meet withdrawals, the blended yield can fall close to, or below, the 8.50% owed.
This is not a theoretical point. CREB is a young company still building its loan book, and its SEC filings show periods in which income has not yet fully covered interest and operating costs. Growing the share of capital deployed in well-secured, performing loans, while keeping enough liquidity for withdrawals, is the central task of managing the portfolio.
Because CREB credits interest daily and that interest compounds, CREB’s obligation to bondholders grows each day on the full balance, including previously credited interest. The portfolio’s income must keep pace with that growing balance. This is one more reason why steady deployment and borrower repayment matter.
If loans earn around 11.8%, why not put every dollar into loans? Because CREB promises investors something loans alone cannot provide: the ability to request a withdrawal at any time. Every other part of the portfolio exists, in part, to support that promise.
Treasury bills are short-term debt issued by the U.S. government. They are backed by the full faith and credit of the United States and can be sold quickly in one of the deepest markets in the world. They earn much less than real estate loans, but they offer two things loans cannot: near-immediate liquidity and very low credit risk. In CREB’s portfolio, Treasuries act as a stable base and a ready source of cash for withdrawals.
Cash is held specifically to fund investor withdrawals. CREB’s target is to hold about 10% of the portfolio in cash, so that typical redemption requests can be paid within the standard timeline, typically 3–5 business days by ACH, without having to sell other assets. Cash earns little or nothing, so every dollar held in reserve slightly reduces the blended yield. That is the cost of offering liquidity.
Mortgage-backed securities (MBS) are bonds backed by pools of real estate loans. Agency MBS are issued or guaranteed by government-sponsored enterprises; non-agency MBS are not. They give the portfolio exposure to real estate credit that is more diversified and more easily traded than a single bridge loan, with yields that typically sit between Treasuries and private loans.
Allocations to institutional real estate funds provide further diversification across many properties and borrowers that CREB does not lend to directly. They can also help keep capital working while new bridge loans are being sourced and underwritten.
Each of these choices involves a trade-off between yield and liquidity:
Too little in loans and the portfolio may not earn enough to comfortably cover 8.50%. Too much in loans and there may not be enough liquidity to meet withdrawals on time. Managing that balance, and adjusting it as investor inflows, withdrawals and lending opportunities change, is the core of how CREB sustains the 8.50%.
The allocations shown on our website are targets and illustrations. Actual allocations vary over time, and the current figures are reported in CREB’s SEC filings.
CREB charges investors no management fees, no account fees and no withdrawal fees. So how does the company pay its bills? Entirely from the spread.
Many investment products charge an explicit annual fee, often 1% to 2% of assets, regardless of how the investment performs. CREB takes a different approach. Investors receive a fixed 8.50%, and CREB’s compensation is whatever the portfolio earns above that.
Economically, the spread does the same job as a management fee: it pays for running the business. The difference is in who bears the risk. With a fee, the manager is paid even if returns disappoint. With a spread, the issuer is paid only if the portfolio earns more than it owes investors.
The spread funds every cost of operating CREB, including:
What remains after these costs is the company’s profit, which can be retained to strengthen the business.
Because CREB is paid from the spread, its interests are aligned with investors’ in an important way. CREB only earns money when borrowers pay their interest and when capital is put to productive use. Making a bad loan does not just risk investor money; it directly reduces CREB’s own income.
The fixed-rate structure also means that when the portfolio has a weaker month, perhaps because a loan repaid early and the capital is waiting to be relent, CREB’s margin absorbs the shortfall first. Bondholders continue to receive 8.50%.
Alignment is a strength, but it has limits, and we think investors should understand them. A margin can only absorb shortfalls up to its size. If the portfolio-level spread is thin, as it can be when a large share of capital is held in low-yielding reserves, there is less room to absorb a missed payment, a defaulted loan or a period of heavy withdrawals.
In that situation, the issuer would need to rely on its other resources, which may include support from its parent company. The parent has no contractual obligation to provide support. That is why the next section looks closely at the risks that could squeeze or break the spread.
The 8.50% is a contractual rate, but no contract is stronger than the issuer’s ability to honour it. Here are the main risks that could squeeze the spread or, in a severe case, affect CREB’s ability to pay.
If a borrower stops paying interest, that loan’s 11.8% stops contributing to the portfolio immediately, while CREB still owes 8.50% on the capital. If the default is not resolved, CREB may need to foreclose. Foreclosure takes time, involves legal and selling costs and, for properties outside the U.S., can involve different legal systems. Even with a strong equity cushion, a default can reduce income for months before any recovery.
The equity cushion protects CREB only as long as property values hold up. A broad downturn in real estate, rising vacancy or a problem with a specific property could reduce the value of the collateral. If a property’s value fell below the loan balance and the borrower also defaulted, CREB could lose principal on that loan.
When a loan book is still growing, a few large loans can make up a large share of it. The Markham loan, at $12.5 million, is CREB’s largest position. A problem with one large loan would have a much bigger effect on the portfolio’s income than a problem with a small one. Concentration typically falls as a lender grows and adds more loans, but until then it is a real risk.
As the spread section showed, the blended yield depends heavily on how much capital is lent out. If new investor money arrives faster than good loans can be found, or if more capital has to be held in cash to meet withdrawals, the portfolio earns less while CREB’s obligation stays at 8.50%. Sustained cash drag can push the blended yield toward or below the bond rate.
Bridge-loan rates move with the wider interest-rate environment and with competition among lenders. If market rates fell significantly, new loans might be made at lower rates, while CREB’s 8.50% stays fixed. The short duration of CREB’s loans means this would show up within months, not years.
CREB’s loans typically run for about 12 months, but investors can request withdrawals at any time. If withdrawal requests were unusually high, CREB could need to sell assets, wait for loans to repay or arrange financing. Payments could be delayed, and CREB has said it would not be able to meet redemption requests if all investors asked at the same time. Heavy withdrawals can also force CREB to hold more cash, which adds to cash drag.
The spread has to cover the full cost of running the business. CREB is a young company that is not yet profitable, and its audited financial statements include a “going concern” explanatory paragraph. That means the auditor has noted substantial doubt about the company’s ability to continue without growing its revenue or obtaining further financing. Investors should read the financial statements and management’s discussion in the SEC filings in full.
CREB’s loans are secured by real estate, but the bonds investors hold are unsecured obligations of the issuer. Bondholders do not have a direct claim on any specific loan or property. If the issuer ever became insolvent, bondholders would be general unsecured creditors, and recovery of principal would not be guaranteed.
CREB bonds are not bank deposits. They are not insured by the FDIC or SIPC and are not guaranteed by any government agency. You can lose some or all of your investment.
Most of these risks act on the same thing: the gap between what the portfolio earns and the 8.50% CREB owes. A healthy, well-deployed portfolio of performing loans gives that gap room to absorb setbacks. A thin spread, a large default or heavy withdrawals reduce that room. Understanding this is the key to understanding both how CREB pays 8.50% and what could prevent it.
No lender can eliminate risk. What a well-run lender can do is reduce it, spread it and be transparent about it. Here is how CREB approaches each of the main risks to the spread.
According to CREB’s 2026 Investor Guide, as of the first quarter of 2026:
Zero delinquency and zero principal lost are good results. They describe the portfolio’s record so far, and past results do not guarantee future results.
If you want to understand whether the spread is healthy, these are the indicators worth following in CREB’s SEC filings:
CREB is offered under SEC Regulation A+ Tier 2, which requires audited annual reports (Form 1-K), semiannual reports (Form 1-SA) and current reports on material events (Form 1-U). These are available free of charge on the SEC Filings page of our website and on the SEC’s EDGAR database under Compound Real Estate Bonds II, Inc. Our Investor Relations team is also happy to walk you through any of these figures.
CREB lends most of its capital to real estate borrowers through short-term, first-lien bridge loans that currently yield around 11.8%. It pays bondholders a fixed 8.50% from that interest income, supported by income from mortgage-backed securities, real estate funds, Treasury bills and cash. The difference is the spread, which covers CREB’s costs.
Bridge borrowers pay for speed and flexibility. A bank can take 60 to 90 days to fund a loan; a private lender can often fund in 5 to 10 days. Borrowers use bridge loans for a short period, typically 6 to 12 months, and then refinance or sell.
No. The 8.50% is a fixed contractual rate, so it does not change with portfolio performance. But it is not guaranteed by any government agency or insurer, and payment depends on the issuer’s ability to pay.
That loan stops earning interest, and CREB’s margin absorbs the shortfall first. Because CREB lends in a first-lien position with a substantial equity cushion, it may be able to recover the loan by enforcing its claim on the property, although that can take time and involve costs. Bondholders continue to be owed 8.50%, and repayment depends on the issuer’s overall financial position.
Because investors can request withdrawals at any time. Cash and Treasury bills provide the liquidity to pay withdrawals without waiting for loans to be repaid. They earn less, which is the cost of offering flexibility.
No. CREB charges no management, account or withdrawal fees. The company is paid through the spread between what the portfolio earns and the 8.50% it pays bondholders.
The rate is written into the bond and does not move with the market. The bond terms can be amended only with the consent of holders of a majority of outstanding principal, as set out in the offering circular.
In CREB’s SEC filings, including audited annual reports and semiannual reports, available on our SEC Filings page and on the SEC’s EDGAR database.
CREB pays 8.50% the same way lenders have always paid their funders: by lending money at a higher rate than it borrows. Real estate bridge borrowers, who value speed and flexibility, pay CREB interest averaging around 11.8%. CREB pays bondholders a fixed 8.50%, and the spread covers the cost of running the business without charging investors fees.
The model is simple, but making it work depends on a few things going right. Borrowers need to repay. Enough capital needs to be lent out in performing loans to keep the blended portfolio yield comfortably above 8.50%. Liquidity reserves need to be large enough to meet withdrawals but not so large that they drag down returns. And the business needs to keep its costs within the spread.
We believe transparency about all of this is what separates a trustworthy investment from a too-good-to-be-true promise. The 8.50% is real, the way it is earned is straightforward, and so are the risks. If you understand both and are comfortable with them, CREB can be a simple way to add real estate credit income to a diversified portfolio, starting from $500.
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How the bond works, portfolio statistics, representative loans, withdrawal terms and risk scenarios, all in one guide you can read at your own pace.
Important information: This article is for educational purposes only and does not constitute investment, legal or tax advice, or an offer to sell or a solicitation of an offer to buy any security. Any offer is made only by means of the offering circular, available on the SEC's EDGAR website and on our SEC Filings page. Figures labelled hypothetical or assumed are illustrations, not reported results or projections. Portfolio statistics are as of the dates stated and will change. CREB bonds are not bank deposits, are not FDIC or SIPC insured, are not guaranteed and involve a high degree of risk, including the possible loss of your entire investment. SEC qualification does not mean the SEC has approved or endorsed the offering. Past results do not guarantee future results. Please read the “Risk Factors” section of the offering circular before investing.
