Position of real estate debt in the portfolio (Roundtable 'Real Estate Debt' – part 3)

November 28, 2025

^{This report was originally written in Dutch. This is an English translation.}

In part 3 of this roundtable discussion, the experts discuss where real estate debt belongs in a diversified portfolio, how it relates to infrastructure debt and private credit, what ESG responsibilities lenders have, and where the greatest opportunities lie. The increasing role of AI is also discussed.

By Hans Amesz

This is part 3 of the report. You can read part 1 here and part 2 here.

From an asset manager’s perspective, where does real estate debt fit into a diversified portfolio and how does it compare to infrastructure debt or corporate credit?

Ibrahim: ‘That depends on the size and objectives of the allocator. Smaller allocators will place all real estate in one category, while more advanced parties will place it either in a category for real estate debt or in a category for private loans.’

What is the typical risk profile?

Gordon: ‘There are Sharpe ratio analyses that show that the risk-return profile for real estate debt is better than for most other asset classes. But with real estate debt, there are many different points on the risk-return spectrum to choose from.’

Ibrahim: ‘Compared to infrastructure, you have broader sector exposure, because real estate debt simply covers more sectors and offers more flexibility.’

Janssen: ‘The collateral in an infrastructure transaction is certainly less liquid and probably less volatile, partly because many of these transactions involve long-term contracts, from toll collection to pipelines. Real estate has proven to be more volatile than infrastructure, but that does not detract from the fact that a long-term lease agreement with creditworthy tenants is probably just as stable and attractive as financing a wind farm for a long period.’

What should you look for when selecting a manager?

Bruijn: ‘A manager must have workout skills and capacity. Furthermore, a manager needs local roots in order to be present in the market with the necessary expertise. He or she must be familiar with the complex legal system in Europe and how to structure loans in different jurisdictions.’

Ibrahim: ‘To add to that, a manager should have a strong track record, ideally over multiple cycles, both in terms of the fund and the investments and portfolio managers. Managers with experience in structuring and creative solutions can potentially extract more value from investments.’

Janssen: ‘Everything that has been said is important, but the continuity of investment teams and co-investment capital is crucial, at least for the more conservative investors in some of our funds.’

De Laurentiis: ‘What matters to investors is conviction. A fund manager must also tell you when not to invest.’

Is real estate debt generally seen as a sustainable or even impactful investment? And if so, why?

Bruijn: ‘Loans are often used in the real estate sector. Given that real estate has an impact on the environment, lenders have an equally important responsibility in terms of ESG.’

De Laurentiis: ‘Real estate is responsible for 30% of global CO2 emissions. You can really influence that. Furthermore, real estate is an asset class where you can carry out real measurements. You can report on energy efficiency, energy consumption, and so on. As a result, investors can trust you based on the right KPIs. ESG must also make sense for investors from an economic point of view. By financing more green assets or the transition, you hedge your exit risk or build up assets that will perform better. ESG must be linked to financial performance and not just to pure reporting.’

Gordon: ‘In Europe, given the regulations and the requirements of investors and tenants, you absolutely have to take into account the expected ESG characteristics of the assets, today and at the end of the loan. That affects your financial performance. Most of the borrowers we work with operate in an ESG-friendly manner that optimises the values of the underlying properties of the loans we provide.’
 

What was considered a green loan five years ago is now an average loan. Standards are improving and will continue to evolve.

 
Bruijn: ‘For us, it is a requirement for borrowers to report on the relevant ESG items. In the beginning, this could be a problem, especially for smaller parties, but now it is increasingly accepted and parties know what is expected of them.’

Janssen: ‘I would say that we are all ESG lenders. You can no longer rent out a building if it does not meet the required parameters. What was considered a green loan five years ago is now an average loan. Standards are improving and will continue to evolve.’

Real estate accounts for more than 30% of CO2 emissions, which means that this asset class plays a key role in decarbonisation. How should a lender respond to this?

De Laurentiis: ‘We can exert pressure. As real estate experts, we have already played an active role by providing information, bringing uniformity to measurements, and so on. Incidentally, there is a difference between American and European asset managers in the area of ESG. The latter group has often integrated ESG into their investment process.’

Where are the greatest opportunities for institutional investors in real estate or real estate debt?

Nobel: ‘I think the opportunity lies in the fact that institutional investors are starting to see real estate in a broader context. It is not only an illiquid credit investment, but also a defensive real estate investment. Many investors are probably still suffering from what they have had to endure in recent years as a result of the global pandemic. As far as I'm concerned, the opportunity lies not so much in this or that sector or region, but rather in seeing a large-scale reallocation of assets, adjusted to the risk appetite of institutional investors.’

Where do you see the most opportunities in real estate debt, spread across different risk profiles and sectors?

Ibrahim: ‘We see the most opportunities in senior lending for transitional assets/business plans. There are opportunities in all sectors, but we see the greatest structural opportunities in residential construction and logistics. We like hospitality in certain European markets, particularly in Southern Europe. We are also enthusiastic about data centres.’
 

In my opinion, the opportunity lies not so much in this or that sector or region, but rather in seeing a large-scale reallocation of assets.

 
Gordon: ‘The big opportunity for real estate debt lies in the growth of private markets as a whole. Real estate debt is an important part of private markets, which is why all investors in those markets should also invest in real estate credit. It offers advantages in terms of absolute returns and also in the lack of correlation with other asset classes.’

What can you say about AI?

Ibrahim: ‘AI makes us a lot more efficient in assessing risks and identifying emerging trends.’

De Laurentiis: ‘AI can accelerate the use of data, which is very important when you are financing billions in loans. I am optimistic about the use of AI in relation to private debt.’