SPONSORED: Principal Real Estate — Finding private real estate debt opportunities in niche sectors

While the U.S. economy is not officially in a recession, a pandemic, followed by government stimulation, followed by inflation and subsequent interest-rate increases can sure make it feel that way in the real estate debt market, says Scott Smith, managing director, portfolio management, for the Principal Real Estate Private Debt team, in an interview  published in the April issue of Institutional Real Estate Asia Pacific. One indicator of these headwinds is the slowdown in real estate debt transactions, which has caused the team to focus more on niche sectors, such as life sciences, medical office and self-storage, and to lean toward the subordinated debt position in the capital stack. Kirloes Gerges, managing director, portfolio management, also of the Private Debt team, adds, “Inherently, debt investments provide more preser­vation from value erosion than equity, but we have to keep a focus on loan-to-value ratios and the size of the equity buffers wi