Real Estate Debt: From Private Credit to Property-Backed Income

Greg Campion: Real estate debt is increasingly becoming a core allocation for institutional investors as the asset class offers opportunities for income, diversification and downside protection. But there are still plenty of questions to explore, including how has the landscape for real estate debt shifted over the past year? Why are limited partners allocating more to real estate debt from their private credit buckets? And what impact could a lower interest rate environment have on the asset class?

Nasir Alamgir: We think it's a structural shift, where real estate, private real estate debt is now disrupting the banking sector in the very similar way to the way the private credit markets happened over the last decade or so. So from that perspective, there's durability in real estate debt. There is diversification in real estate debt from a private credit allocation. There are strong dividend yields and all of those things appeal to private credit investors.

Greg Campion: That was Nasir Alamgir, head of US and European real estate debt at Barings. And this is Streaming Income, a podcast from Barings. I'm your host, Greg Campion. Coming up on the show, understanding the evolving landscape and opportunity in real estate debt. Before we get into the conversation, remember you can follow Streaming Income on Apple Podcasts, Spotify, and if you'd like to watch the video episodes on YouTube as well. And don't forget to follow Barings on LinkedIn, where you can subscribe to our monthly newsletter, Where Credit is Due, where we spotlight people and portfolios across asset classes from high yield to private credit and everything in between. With that, please enjoy this conversation with Nasir Alamgir. All right, Nasir, welcome back to the podcast.

Nasir Alamgir: Thanks for having me. It's great to be here.

Greg Campion: Excited to have you back. I think you and I were both just looking at when the last time you were on the podcast was, and it was incredibly beginning of last year, so it's like a year and a half or something like that.

Nasir Alamgir: Almost 18 months.

Greg Campion: Yeah. So a lot's going on and I want to get into that. Maybe before we start, for those folks who haven't heard our prior episodes, can you just describe quickly your role at the firm and then we can get into maybe what's changed over that year and a half?

Nasir Alamgir: Sure. My name's Nasir Alamgir. I head up our US and European real estate debt business at Barings and been here for 10 years, and so far the journey has been very eventful.

Greg Campion: Yes. Nice. Okay, cool. So catch us up. So I won't rehash everything we talked about on the podcast last time, but give us the high level view. You look back 12, 18 months, whatever the time period you want, and just update us on kind of big trends that are going on in real estate, that if you're not paying attention in the weeds of this market every day, what's been happening?

Nasir Alamgir: Well, I think it's interesting. I was thinking about the things that have changed since we last talked, and I think the list would be a lot shorter if I talked about the things that haven't changed versus the things that have changed. If we think about the things that haven't changed, we still have a war in Europe, we still have high interest rates, though they're starting to come down a little bit slowly and politics are still front and center globally, not just in the United States. But if I'm answering your question in terms of what has changed over the last 18 months, obviously we've had a presidential election and that policy coming out of the executive branch has been very quick, very large, and very impactful.

Greg Campion: Yes.

Nasir Alamgir: When we think about the tech sector, really artificial intelligence over the last two years has had an incredible impact. Not just on the consumer, but also on the institutional market as a whole, whether you're an investor or a seller of risk.

Greg Campion: I want to come back to that one for sure. Yep, yep.

Nasir Alamgir: And then when you couple all of that, it's really the pace of change that's impacted us the most. I think investors are still grappling with that pace of change. And when we think about that in terms of real estate itself, when you think about our, what's the uncertainty on valuations, because of policy shifts and changes, you really have to think about that risk almost at a micro market level today. Over the last 15 years, we benefited from macro trends, so whether it was the internet boosting the industrial warehouse distribution infrastructure, whether it was just the shortage of housing boosting home prices as well as rents, but today you almost have to look at each individual on its micro location and its micro qualities.

Greg Campion: Okay. Okay. This is a great starting answer, because you have gave me so much stuff to come back to that I already want to talk about, so this is good stuff. All right, let's put a pin in a couple of those items for now, because I want to come back to those, the AI and also this idea of the sort of looking at real estate on the micro level. I think those are super important. Let me shift gears though. I want to talk just about, and I want to hit this right up front. I'm thinking about titling this episode, real estate debt from private credit to property backed income. I'm not going to mention if I had help with AI on that title or not. I'm just going to say it's a good title. But anyways, let's talk about this idea of private credit, because we hear, I think more and more now, even probably more so than the last 18 months about investors who are considering this asset class or allocating to this asset class out of private credit buckets. I don't know that that's historically been the case. I think it's started to move that way,, but talk to me just a little bit about that trend, if you're actually seeing that and then maybe if so, what are the big drivers behind that?

Nasir Alamgir: Sure. It's a trend that we probably started to notice in late'23, certainly very pervasive in'24 with private credit investors looking at real estate debt as a diversifier for their private credit allocations. I would say that that's coming from a few different, there are a few different reasons why that's happening. The first would be that their allocations to private credit, so institutional investors as a whole are allocating more dollars to the private credit markets. Specifically when you think about the traditional corporate private credit side, what you saw is the non- banking sector disrupting the banking sector and therefore the opportunity and the returns, and the dividends driven by private credit were something that institutional investors were looking at in a non broadly syndicated market way. You're starting to see that trend in real estate debt and we started to see that trend going back to 2023, mostly because of bank pullbacks, but that looks like it's not just cyclical. We think it's a structural shift, where real estate, private real estate debt is now disrupting the banking sector in a very similar way to the way the private credit markets happened over the last decade or so. So from that perspective, there's durability in real estate debt, there is diversification in real estate debt from a private credit allocation, there are strong dividend yields and all of those things appeal to private credit investors.

Greg Campion: Awesome, awesome. And so, is that a trend you're seeing globally? When you're out there talking to investors, are you finding yourself having conversations with the folks who manage private credit at a lot of these institutions or how does that work?

Nasir Alamgir: Absolutely. Whether it's in the US or whether it's in Europe, or whether it's throughout the Asia Pacific region, the investors that we're talking to aren't always coming from a real estate bucket. I would say maybe less often coming from a real estate bucket and more often coming from a private credit bucket.

Greg Campion: And then, I just think about what are the differences between real estate debt and private credit. Obviously you've got this kind of inherent security with having a hard asset collateral. I mean, what else is out there? I mean, you mentioned diversification. Is there any other kind of attractions or reasons why private credit investors wouldn't want to invest in real estate debt?

Nasir Alamgir: I think focusing on that real hard asset aspect of real estate debt is probably one of the strongest arguments for real estate credit as an addition to your private credit allocation. But it's not just the fact that you have the hard asset, but you generally, institutions like Barings that have an equity arm have the ability to actually own, operate and create value out of that hard asset. So sometimes it's a lot harder if you're buying, for example, automotive part manufacturing business, really running that as opposed to providing some source of PE capital with a leveraged buyout. It's just a different concept in terms of how to realize on the value to the extent something goes wrong.

Greg Campion: Yeah, yeah, got it. And we're seeing that private credit universe kind of expand so rapidly, not only into things like real estate debt but also infrastructure debt also into asset- based finance. Even things like look at it from a Barings perspective, like our portfolio finance group, you can probably put under that banner these days. Even stuff like Capital Solutions, which is more bespoke financing type of things, but there's often an asset backed element to that. So it's really interesting and it's really interesting to see real estate debt many times included in this universe.

Nasir Alamgir: Yeah, no, there's a lot of blurring of the lines between real estate credit and other parts of the lending universe that I'll say participate in that real estate credit. So I know at some point we'll probably talk about data centers, because we're going to talk about AI and that has an infrastructure play to it. There are specialty asset classes within real estate like Marinas, which is a Capital Solutions product. And so, we can kind of go through the entire list and it runs the gambit from private placements to portfolio finance, to Capital Solutions.

Greg Campion: That's a really good point. I feel like the blurring of the lines is a great way to put it too, because even an example that you gave there, Marinas, it's like, okay, is that real estate? Is it infrastructure? It could fit into a bunch of different categories, and so it's kind of interesting to see that. I just want to follow up on one thing. So you made a comment just about the kind of shift that's been underway and similar to what we saw in the direct lending space last 10, 12 years, which is this kind of structural shift away from banks due to various capital constraints and such toward more institutional lenders. Maybe just give us a quick update where we are in that sort of nine inning baseball game when it comes to real estate debt.

Nasir Alamgir: I think we're probably still in the early innings to mid- innings. This structural shift really didn't start taking place until probably the second half of'22, and at that point nobody was really lending, just because monetary policy was getting tight and we had so many other things happening globally. So it's really only been a couple of years into this that we're seeing this secular shift. And that's mostly because coming out of the financial crisis, we had some of that early secular shift, because banks had been regulated out of the market, but they came back in with deregulation. So again, this could be a little bit of a seesaw is a permanent cycle or not, but I think one of the reasons I think it has more staying power this time around is banks are getting their real estate exposure indirectly. So rather than necessarily making real estate loans, what you're seeing them do is make warehouse financing available to the non- traditional bank lenders. They may be approaching it through a Capital Solutions oriented market. They may be looking at it through a private placement lens, so that blurring of the lines is actually affecting the way banks approach real estate as well. And so, I think that shift seems to be secular, which means that our space as a private lender in real estate looks like it's more permanent. Then just from a pure statistical perspective, one of the things we've talked about is that wall of maturities and the impact on bank balance sheets of troubled assets and when was distress coming, et cetera, et cetera. Those things continue to persist on bank balance sheets. So even if we think this administration will be a little bit more relaxed about regulation, if not easing of regulation, really the only players we've seen step back into the market with any significance would be the major money center banks and they're really only doing the safest things for the biggest borrowers. So what you end up with is, even in an environment where that changes, you have this wall of maturities. And one of the things that we've been looking at, and we talked about this last time, is the amount of real estate loans on bank balance sheets and that number continues to grow, right? Some of it's adding, but one of the things that we're focused on today is the amount of loans that were expected to mature in a year that are now rolling into the next. So when we looked back at the numbers for 2023, there were roughly 150 billion of loans that were expected to roll in'22 that rolled into'23. Then from'23 to'24, that number jumped to 250 billion, and then from'24 to '25 it's now 400 billion. So forgive the numbers aren't perfectly accurate, they'll give you a sense of what's happening. And so, this year we were expecting a little over half a trillion of loans to mature. Instead, it's over 900 billion of loans maturing this year, and it's that accumulative effect of what rolled from'22 to'23 didn't get paid off in'23. And so, that proverbial can, we talked about last time too, continues to get kicked down the road. At what point does that have an impact on markets? We didn't see the distress that we thought might've been available in the markets, but we are seeing some things in the markets where we are seeing that risk laid off and maybe we can talk about that.

Greg Campion: Yes. Okay. So that whole phenomenon that you just mentioned in terms of, I don't know if you'd call it kicking the can down the road or not, but how do you see that all sort of washing out? How do you see that all getting rectified? And I don't know if I'm conflating different questions here or not, but do you think that, does that mean we've got more distress on the way that we expecting maybe to materialize sooner or not?

Nasir Alamgir: We probably have to stop using the word can, right? Is it a barrel, is it a semi truck that we're trying to kick down the road?

Greg Campion: Yeah, that's true. Once you're using trillions for terminology, can may not be your word.

Nasir Alamgir: Look, one of the things that we're seeing banks do today, which they hadn't been doing before, is actually tapping the synthetic risk transfer market. Effectively what that means is they're creating, they're buying insurance, they're transferring the risk of these loans onto a third party investor that are receiving attractive risk adjusted returns for taking that risk. So these are high yielding products typically in the mid- teens. So we're seeing more and more of that, as opposed to the actual sale of an note or foreclosure of an asset. So that's something that's probably taken us a little bit by surprise, because I don't think that's what we necessarily anticipated, because we had seen banks take the write- downs on their loans quarter after quarter for nearly two and a half years. So we expected that to allow them to release assets at prices that had been properly adjusted. But that's not what we're seeing. We're not seeing as much of that. What we're seeing are these synthetic risk transfer products that are out there, that investors are buying to help shore up bank balance sheets, and these are sort of the regional bank balance sheets.

Greg Campion: Okay. So how does that ultimately play out though for the real estate debt market? Does it mean these assets don't get repriced?

Nasir Alamgir: At the end of the day, regardless of how much money has been raised for distressed capital or synthetic risk transfer vehicles, et cetera, regardless of the amount of money that's been raised in the private real estate credit markets, it does not cover the gap of these challenged assets in this maturity wall. So inevitably for at least the next two years, we'll continue to see really attractive opportunity to put new capital to work, but we are going to probably see more and more strain on the system in various ways.

Greg Campion: Okay. Yeah, I was curious, are you seeing that more as threat or opportunity?

Nasir Alamgir: It's both, right? The threat is to valuation, so again, just the challenge over coming up with clear valuations is difficult, because what does trade in the market is highly liquid, but then there's a really, really big chunk of the market that doesn't trade in the market and it's highly illiquid and it's hard to gauge value for those types of assets.

Greg Campion: Got it, got it. Okay. That'll be interesting to watch kind of in the months and years ahead. So I'll have to stay close on that. I failed to ask you, and it's related to the stress question, but just rates generally. So we appear to have entered into a new regime, a rate cutting cycle here. We'll see how many more cuts we've got in our future markets pricing in I think another one to two this year. What do you think generally about how lower rates impact real estate debt or is that kind of putting it the wrong way? Do you still see there, there's still substantial enough or high enough that you wouldn't consider it a low rate environment? How are you thinking about race generally?

Nasir Alamgir: So with rates specifically, it's probably less concerned or focused on the rate itself. I'm probably more concerned on the independence of monetary policy in the Fed. So one of my bold predictions at Barings 360 last fall was that Powell wasn't going to make it through 2025. Now, obviously-

Greg Campion: Got a little time.

Nasir Alamgir: No, look, I think that prediction is now going to prove out to be incorrect, but it's not because the executive branch doesn't want him gone. What I failed to take into consideration is how powerful the bond markets are. And so, when the threat of Powell being removed was first and repeatedly presented, the bond markets responded very negatively. So the cost of borrowing for US treasuries, value of the dollar, everything was just impacted and basically the bond markets have been able to police that course of action to some degree or another. And to the extent that the bond markets can continue to preserve, I'll say the independence of the Fed, because it'll be the ones that'll dictate the cost of borrowing and other factors, then it's less so the rate and just more so the independence of the rate, because there are lots of implications to that independence that have much more meaningful impact to all markets, not just the real estate market.

Greg Campion: Okay. That might have to be a separate podcast.

Nasir Alamgir: A whole podcast.

Greg Campion: I don't even want to start digging there, because that's just-

Nasir Alamgir: No, I mean look, I think assuming that all holds, we'll continue to see rates come down, we probably think from a research perspective, from our own economist perspective, bottoming out somewhere close to three ish. And at that level, what I expect is actually probably, because of the way private markets are so embedded into lending of all types, I'm not sure coupons necessarily come down as much. So I think spreads will probably widen, simply because the availability of capital for all the needs that are out there won't be available. And so, you can preserve your returns. So I don't know if it necessarily improves the cost of borrowing for all borrowers. It will marginally, maybe a little bit more than marginally, but it's not going to create, I don't think it's going to create a significant growth opportunity.

Greg Campion: All right, so base rates come down a bit, but maybe spreads make up for that.

Nasir Alamgir: Yeah, they won't make up for all of it, but I'm just saying it won't just be a net negative to overall coupons. I think it'll be somewhat offset by increased cuts.

Greg Campion: Got it. And do you think you see, does the impact of lower rates, does that help unlock markets at all or help buyers and sellers come together? Especially in some of these assets that have been-

Nasir Alamgir: If I'm wrong about spreads, it'll unlock the markets more, because the lower cost of borrowing should increase transaction activity. If I am half right about spreads, then it'll half unlock the market. But I think at the end of the day, I don't know if there's enough money in the system to truly unlock the value in real estate. And I think that's the biggest challenge that I see in the real estate market as a whole, is there isn't enough capital to unblock the system, because whether it's office loans in particular, which we've been picking on for a number of years now, it's still a super challenged asset class. We will continue to feel pressure on everybody's balance sheets, because of these challenged loans and these challenged property types.

Greg Campion: Okay. Okay. You mentioned office and we've also mentioned a couple other sectors. So I want to do a little sector lightning around here and I'm going to add some constraints here that I didn't tell you about beforehand. One is, I want you to give me a view on the sector, positive, negative or neutral. And you only get to say neutral one time. And we're trying to keep this 30 seconds or less. Let me start with, is this even appropriate to call this a sector construction lending or not really, because it's-

Nasir Alamgir: We can, but that's where I'm going to use my neutral answer.

Greg Campion: All right. You sure you want to use it on the first one?

Nasir Alamgir: I'm using it up front. I'm going to use it on the first one.

Greg Campion: All right, construction lending, what are you thinking?

Nasir Alamgir: I'm neutral. So I was very bullish on it last year and I'm going to say not neutral to the extent that neutral versus bullish, bearish, I'm somewhat neutral to where my response was last year. And the reason I say that is though I still continue to see lots of opportunities in construction, we have risks in construction that we didn't necessarily have last year. One of them, for example, when we think about the impact of executive policy-

Greg Campion: Tariffs.

Nasir Alamgir: Tariffs. One on cost of goods and then immigration, cost of labor. So costs are a big thing that we have to focus on in the construction space. And then the second is exit strategy. So again, with some of the uncertainty around monetary policy and independence, what's the exit strategy from some of these assets? It's great to be in the best in class projects, you still get really attractive risk- adjusted returns, but there are definitely some headwinds to that. So I am bullish, meaning we'll continue to make lots of construction loans. We're just going back to that word micro, very focused on each individual risk that we're taking.

Greg Campion: Very selective. Yeah. Got it. All right, next one. Multifamily.

Nasir Alamgir: Okay, so multifamily. I am going to be favorable to. And I think I was probably a little bit more negative about it last year, simply because we had this abundance of supply coming online. When you look at forward construction starts, they've come down fairly significantly across housing in general. So I think we will start to hit that equilibrium point a little bit sooner. Housing is still a crisis globally, it's true whether you're in the UK or down in Australia, just as you are in the United States. So that'll continue to be a space that there will be opportunity. Again, because there are two sides to every coin, there are some risks there, but again, generally favorable.

Greg Campion: Okay, cool. All right. This one is kind of hard to characterize, because there's a lot of different sectors within it. I'm going to say industrial and specialty. And I'm going to be thinking about things like logistics, cold storage, even life sciences. Maybe that's an unfair question to say if you're positive or negative on that, because there's a lot there. But how would you think about that space generally?

Nasir Alamgir: Well, if you're going to go that broad then I'm going to give you positive and negative. How about that? So we can go with both.

Greg Campion: I might have to allow a second neutral. Yeah.

Nasir Alamgir: The only reason I say that is I think in every asset class we're going to talk about, I think that there are ways to view them through a positive lens if you focus on the micro, right? So I feel like I'm cheating with this answer a little bit, but specifically with industrial, let's use distribution warehouse as opposed to life science at this point, just to focus on something. When you think about the impacts on tariffs and then those things are always changing, so unless you're checking the latest tweet, you don't really know where it is. What you're focusing on is where are you least impacted by tariffs, what part of the supply chain distribution chain are you least impacted by tariffs? And you can focus on deploying your capital in that space and being sort of as safe as you possibly can. And generally speaking, because as an industry we aren't necessarily always as efficient as differentiating by micro market, you can take advantage of that broad brushstroke painting an asset class or a property in a certain way. And so, I do think that there are differentiated opportunities that are really attractive. We're seeing some green shoots in the life science space. It's been challenged for a number of years now. There's some policy that challenges it further, but generally speaking we think the tide's turning there. And generally speaking, I would say I'm more positive than negative on the industrial R& D maker space/ lifestyles.

Greg Campion: Basically everything that I couldn't include in another category.

Nasir Alamgir: Right.

Greg Campion: All right, two left. Office, everyone's favorite one to speculate about. What do you think in these days?

Nasir Alamgir: So at the end of last year and the beginning of this year, probably over a six to nine month period we put out a billion dollars in office loans. And that's simply because we saw differentiated micro markets. So I'm going to keep using this answer and sorry to be repetitive, but our research team put together the scatterplot of the 20 top MSAs and then each micro market within that MSA. And I think what was really interesting about that scatterplot when you looked at it was you could take a market like New York, and you saw half a dozen dots on the top right- hand quadrant. So highest value per square foot, lowest vacancy rates, highest rents, like outperformance. But then you saw half a dozen dots in the lowest quadrant, highest inaudible-

Greg Campion: Yes, both within New City.

Nasir Alamgir: Both within New York City. And that's the first time in my entire career. And you made a point to point out how long that career was last time we were on, so I'm not going to use the numbers this time, but point being it's the first time that I've seen that. I'm not sure if a market has ever really done that to this degree. So the range in outcomes is so great within a small geographic boundary that at some point something has to give. And what I mean by that is if you think the two most expensive things on your balance sheet are your people and the space you occupy, at some point when do you decide not to pay a hundred dollars a square foot to be in midtown as opposed to paying$ 40 a square foot to be in downtown? At what point does the balance sheet rule? And that switch does need to take place at some point in time, I just don't think it's going to happen anytime soon.

Greg Campion: Okay. Yeah, I've seen that chart. That was striking to me as well, because yeah, just to your point, it's like okay, you can't really make broad- brush statements or generalizations at the city level or almost like even at the neighborhood level, it's down to the block level and the specific property level, right?

Nasir Alamgir: It can be, yeah.

Greg Campion: So yeah, it is super interesting. Some of us were having this conversation earlier today, we're filming this in Charlotte today and we're looking at, there's brand new skyscrapers going up on this block, but then this block has a 1960 skyscraper that's half vacant sort of thing. So it's very interesting to see this dynamic. Any updated views on work from home or anything like that as it relates to office or what you're seeing there?

Nasir Alamgir: I think we're very close to being at pre- pandemic attendance, generally speaking. I would say that obviously you're based here in Charlotte, I'm based in New York City. If I'm judging by how long it takes me to get a cup of coffee in terms of how long the line is, we're definitely at pre- pandemic levels. But if there is, I'm sure there's other criteria that comes into it. What I think that, less so return to office at this stage. I think more so, and we'll talk about this probably when we talk about data centers, which I'm sure is on your list, the impact of AI and what does that have on real estate as a whole. And I think office is going to be one of those at the forefront of that.

Greg Campion: Let's hit that. That's the last one. Data centers. So let's hit it.

Nasir Alamgir: So data centers, there's a bullish camp and there's a bearish camp. There really isn't a lot of light in between the two, but there are reasons for both. You're bullish, because the need for data storage and data center capacity is growing exponentially. A lot of that was powered by the cloud before and now it's powered by AI or driven by the cloud, now driven by AI. So the need for data centers is abundant. I think the bearish camp is technology changes at a blink of an eye pace and what needs to be in a data center today on the physical ground may be zapped into space in the future. How long does it take for that transition to make?

Greg Campion: Yeah, and we saw that earlier this year with the whole deep- seek thing out of China, where everybody was like, " Oh, wait a minute, do we actually really need all these chips to do this work?" To your point, it's just changing very rapidly. So yeah, you could see both cases basically.

Nasir Alamgir: And then the other negative is just, at least in the United States, our grid, our power grid is so old and these things rely on so much power that there's just a natural limitation. And so, at the end of the day, doesn't matter if you can build it, if you can't power it.

Greg Campion: Right. All right, so I missed that. Were we positive or are we negative, or are we hedging?

Nasir Alamgir: Well, I think that there are the bullish say that the need for it far outstrips the risks that I've just identified. And then conversely the bears are going to say you can't really overcome these risks.

Greg Campion: Okay. So how do you think about that from a debt investor lens though?

Nasir Alamgir: Right. So I think there are two types of users. There are the trillion- dollar companies that have lots of great credit, which will sign long- term leases, and we're happy to back those all day long, whether it's the construction of those hyperscale facilities or whether it's providing permanent financing. And that's one of those blurring of the lines between infrastructure and real estate, and we partner on that aspect of it. And that's from a debt perspective, from an equity perspective, you're probably thinking more power shells as opposed to taking some of the true entitlement risk. So you want to make sure the power is already there, you want to build the shell and let somebody else do the leasing for it.

Greg Campion: Okay, cool. All right, thank you. You have just run the sector gauntlet successfully, so I appreciate you doing that. Let's zoom out a little bit to look at other parts of the world here. And I know the real estate debt markets are very much developing in Europe and in develop APAC, Barings has a big presence in these markets. Talk to me just generally about what you're seeing, the international opportunity set, and I'm curious if you're seeing investors look at this asset class globally or maybe if they're not, should they be? Kind of, what are your thoughts on that whole subject?

Nasir Alamgir: Yeah, no, I think they definitely should. I mean, the world, we know it's intertwined, right? It's as small as it's ever been. I think if you think about an asset like a warehouse or distribution center, I think that that's one that you really do want to take that global lens to. So tariffs, while they're impacting the flow of goods within our country, it's obviously impacting the distribution of goods from other countries, whether it's to our country or within region. So I think one of the things we can look at is maybe some of our ports are challenged, depending on whether those goods are coming from China, South America or from Europe. But then you could see in Europe for example, you don't have a lot of logistics supply and you're seeing more internalization of that distribution, because maybe fewer goods are moving to the United States. So they're moving within continent. That means that demand for logistics is increasing. So where there might be some challenges in the US in some logistics markets, there could be very positive trends in Europe, in the UK, in the logistics market. And the same holds true for the APAC region. Goods that might've been flowing to the United States may be flowing down to Australia or New Zealand. And then maybe finding its way to the United States anyway, but still. So you do want to follow those trends, because that flow of goods is really a big part of the logistics chain.

Greg Campion: Yeah, that makes sense. It's all connected. What about if you look at what's on offer for a real estate investor, let's say in the US versus what's on offer in Europe versus let's say Australia or developed APAC? I'm thinking about, I'm kind of curious how these markets are the same or different. Does pricing and structuring and all that kind of stuff look the same or is it like the US is such a bigger developed market that things look different? Broad strokes, how do these markets kind of compare and contrast?

Nasir Alamgir: Well, the size of the U. S market is the equivalent of the entire European and UK market, and much of the APAC market. So the U. S liquidity and stability of currency, et cetera, et cetera generally blend it to be the market that'll have the lowest cap rates or potentially the tightest spreads. But you definitely see differentiation between the two and you can really measure that by risk. So your risk- adjusted returns can vary by property type, can vary by risk profile and obviously they can vary by geography. And I think we spend a lot of time looking at that relative risk between property types and geographies and risk profile. And it is about finding those different, just like you're trying to find those micro markets within office or industrial, you're trying to find those trends within the capital stack and your risk profile to find the best risk- adjusted returns. And so, yes, there is differentiation and that differentiation does change over time. It's not like there's this consistent imbalance between the two, because the markets, they're slow, but they aren't inefficient. They will find those pockets and generally speaking, most of the largest institutional and sophisticated investors are looking for that differentiation.

Greg Campion: Yeah, it makes a lot of sense and I think I'll give a plug to our research team, because I think they're working on a white paper that may be out by the time this podcast is out that dives deep into real estate debt overall. But I think they're going to hit on the different nuances between some of these geographic markets to the extent that our listeners and viewers are looking at the asset class globally, hopefully that will be of some assistance to them.

Nasir Alamgir: Absolutely.

Greg Campion: All right, a couple more things here and then we're going to land the plane. So for folks who are investing in real estate debt, maybe even specifically the ones who are considering a real estate debt out of their private credit bucket, is there any big challenges they should be thinking about or any big considerations? Anything else that is top of mind that we haven't really talked about yet?

Nasir Alamgir: I think the one thing with real estate debt that may be different or challenging for some of these investors is really the scale at which you need to do it. So generally speaking, what I mean by that is the safest property types or the safest loans are going to be large institutional quality assets and institutional quality markets with institutional quality sponsorship. And generally speaking, those loans are going to be a lot bigger than what you might see and lumpier than what you might see in some of the other credit markets. And so, to avoid concentration risk, usually you have to access the real estate credit markets through a fund or a vehicle. In order to do it sort of individually on your own, you would have to do it in scale.

Greg Campion: Got it, got it. Okay. Yeah, that's a really good point. I'm not sure that's as immediately obvious, but once you think about that, and these are probably a lot bigger transactions than we're talking about, maybe just like a corporate loan to a middle market company or something like that.

Nasir Alamgir: And there's probably even less transparency too when you really think about it, just because we talk about the differentiation, and maybe this will be the theme of this podcast is just since micro is so important, having access to information, being able to differentiate that risk and those assets takes a lot of expertise. So that's just not something that's easily achievable. So it's a transparency of information can be challenging.

Greg Campion: I see what's going on here. You're trying to rename this podcast episode mid- episode. All right, listen, let's finish up here and look forward. So let's think about what you'll be keeping an eye out rest of this year and heading into 2026. Any big trends? Any big themes, anything I guess you would recommend investors or prospective investors in the asset class keep an eye out for?

Nasir Alamgir: Sure. I think there are a few things that we need to keep an eye out for. So we were obviously keeping an eye out for the presidential election last year. I think we're keeping an eye out for midterm elections this time around, so that'll be a big focus of ours. I think we're also going to keep an eye out on default rates across the credit spectrum, not just in real estate credit. Certainly we want to understand the impact of inflation or policy on performance, so that we'll have macro and micro effects. So we're really focused on that. And then I think we'll continue to focus on the Fed and its independence, and see how that comes along.

Greg Campion: All right. Well, no shortage of stuff to keep an eye on. This has been a great update. Thank you very much for being here and doing this again. It's always a pleasure and I appreciate especially being such a good sport for me, changing the rules, throwing in random games, all that kind of stuff.

Nasir Alamgir: My pleasure.

Greg Campion: Yeah, good stuff. Thank you, Nasir. I really appreciate it.

Nasir Alamgir: Thanks, Greg.

Greg Campion: Thanks for listening to or watching this episode of Streaming Income. If you'd like to stay up to date on our latest insights across asset classes ranging from high yield and private credit to real estate debt and equity, make sure to follow us and leave a review on your favorite podcast platform. We're on Apple Podcasts, Spotify, YouTube, and more. And remember to follow Barings on LinkedIn and subscribe to our newsletter, Where Credit is Due, to see our latest updates. Thanks again for tuning in and see you next time.