Chris Duey

What is the biggest challenge you’ve encountered as a lender in 2026?

The biggest challenge has been maintaining discipline as competition increases. Spreads have tightened, but that does not mean the underlying real estate risk has declined at the same pace. The recovery continues to vary meaningfully by property type, asset quality and market.

The key question is whether we are evaluating a good property with a financing issue or a property with a more fundamental challenge. Additional time and capital can help address the first situation. They do not necessarily solve the second. Our focus is on understanding the property’s cash flow, the sponsor’s assumptions, and the ability to repay if the business plan takes longer to execute. We want to be constructive, but we also have to be realistic about what the property can support. 

In competitive processes, there is often pressure to stretch on structure or pricing. We would rather be comfortable with the quality of the loan than simply be comfortable that we won the deal.

Which property sector is most attractive from a lending perspective today, and which are you most cautious about? 

Industrial remains the most attractive property sector from a lending perspective. We continue to favor transitional industrial opportunities, including post-construction lease-up and stabilization strategies. While tariff and trade-related uncertainty has added some noise, fundamentals remain resilient. Leasing activity is healthy, supply pipelines are moderating, and many assets continue to generate NOI growth through business plan execution rather than relying solely on market rent appreciation. The sector also benefits from long-term demand drivers, including reshoring, supply chain optimization and e-commerce. 

On the cautious side, I would highlight multifamily rather than defaulting to office or life science. We remain active lenders in the sector, but we are more selective than in prior years. A significant wave of apartment deliveries across many Sun Belt markets has pressured occupancy, rent growth and lease-up timelines, widening the gap between markets and assets. 

As a result, we are focusing on markets with strong demographic trends that were less affected by the recent construction boom. From an underwriting standpoint, we are emphasizing durable NOI growth through operational improvements and expense management rather than relying on aggressive rent growth assumptions. Long-term fundamentals remain attractive, but near-term performance is likely to stay highly market-specific, making disciplined asset and market selection critical.

What’s your competitive edge in deals today, and who are you competing against most often (banks or non-banks)? 

Our advantage is the depth of the platform and the relationships behind it. Principal brings together origination, underwriting, servicing and portfolio management, with sourcing relationships across borrowers, brokers, banks and joint-venture partners. For us, the value is not simply seeing more opportunities. It is having the perspective to decide which opportunities make sense and how to structure them. 

On competition, it depends on the loan. Banks remain relevant, while non-banks continue to play an important role in transitional and structured lending. The competitive set is not the same across all market segments.

We want to offer financing that fits the borrower’s business plan without losing sight of our investors’ interests. Sometimes that means finding a workable structure; sometimes it means recognizing that we are not the right lender for a particular transaction. We are certainly interested in winning business, but not at the expense of disciplined credit judgment. 

The structure that helps win a deal should not become the reason it underperforms later.

What is the most important thing you’ve done as a lender to protect your loan portfolio over the last year? 

The most important step we have taken to protect the portfolio has been maintaining discipline and resisting the pressure to deploy capital simply to maintain volume. With rates elevated, economic uncertainty still present, and performance varying across markets and property sectors, we have kept a high bar for new investments while preserving flexibility within the portfolio. 

That means concentrating capital in sectors and business plans where we have the strongest conviction and avoiding situations that require too many things to go right for a loan to perform. We have also focused on downside scenarios, particularly refinancing risk, operating-expense pressure and slower-than-expected business plan execution. In today’s environment, protecting principal is often more important than maximizing volume.

By staying selective, focusing on durable cash flow and working with experienced sponsors, we believe the portfolio is better positioned to perform even if interest rates remain elevated longer than expected.

Lightning Round:

Super Bowl or World Cup? Kansas City Chiefs.

If you could train AI to do one new thing, what would it be? Five-year forecasts.

Best vacation you ever took? Jackson Hole.

Last time you said, “Phew, that was a close one!”? My last watchlist meeting.

Conversions: “Keep ’em comin’” or “Sooo 2020 (scoff)”: So 2020.

Sun Belt multifamily or Boston life sciences? At the right basis, Sun Belt multifamily. 

Book reader or phone scroller/email checker before bed? Emails.

Fitness activity of choice? Playing golf.

“Power” song you listen to when mentally preparing for a big event/deal/day? “Back in Black.”