Real estate debt investments offer attractive risk-adjusted returns with downside protection from collateral. Understanding the debt stack is essential to evaluating opportunities.
Debt Types
- Senior mortgage loans: Lowest risk, lowest return
- Mezzanine debt: Higher yield with subordinate position
- Preferred equity: Equity-like returns with debt-like protections
- Bridge loans: Short-term financing for transitional assets
Investment Considerations
Debt investments require careful analysis of borrower quality, collateral value, and structural protections including covenants, reserves, and recourse provisions.