Principal Credit Real Estate Income Trust
11/10/2025 | Press release | Distributed by Public on 11/10/2025 15:37
Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)
Management's Discussion and Analysis of Financial Condition and Results of Operations
References herein to "Principal Credit Real Estate Income Trust," the "Company," "we," "us," or "our" refer to Principal Credit Real Estate Income Trust and its subsidiaries unless the context specifically requires otherwise.
The following discussion should be read in conjunction with the financial statements and notes thereto appearing elsewhere in this Quarterly Report on Form 10-Q ("Form 10-Q").
Forward-Looking Information
Some of the statements in this Form 10-Q constitute forward-looking statements because they relate to future events or our future performance or financial condition. The forward-looking statements contained in this Form 10-Q may include statements as to:
•our future operating results;
•our business prospects and the prospects of the assets in which we may invest;
•the impact of the investments that we expect to make;
•our ability to raise sufficient capital to execute our investment and lending strategies;
•our ability to source adequate investment and lending opportunities to efficiently deploy capital;
•our current and expected financing arrangements;
•the effect of global and national economic and market conditions generally upon our operating results, including, but not limited to, changes with respect to inflation, interest rate changes and supply chain disruptions, and changes in government rules, regulations and fiscal policies;
•the adequacy of our cash resources, financing sources and working capital;
•the timing and amount of cash flows, distributions and dividends, if any, from our investments;
•our contractual arrangements and relationships with third parties;
•actual and potential conflicts of interest with the Adviser or any of its affiliates;
•the dependence of our future success on the general economy and its effect on the assets in which we may invest;
•our use of financial leverage;
•the ability of the Adviser to locate suitable investments for us and to monitor and administer our investments;
•the ability of the Adviser or its affiliates to attract and retain highly talented professionals;
•our ability to structure investments in a tax-efficient manner and the effect of changes to tax legislation and our tax position; and
•the tax status of the assets in which we may invest.
In addition, our narrative analysis below contains forward-looking statements intended to enhance the reader's ability to assess our future financial performance. Forward-looking statements include, but are not limited to, statements that represent our beliefs concerning future operations, strategies, financial results or other developments, and contain words and phrases such as "anticipate," "believe," "plan," "estimate," "expect," "intend" and similar expressions. Forward-looking statements are made based upon management's current expectations and beliefs concerning future developments and their potential effects on us. Such forward-looking statements are not guarantees of future performance. Our actual results could differ materially from those implied or expressed in the forward-looking statements for any reason, including the factors set forth in Item 1A. "Risk Factors" section of our Annual Report on Form 10-K for the year ended December 31, 2024, and elsewhere in this Form 10-Q. Other factors that could cause actual results to differ materially include:
•changes in the economy, particularly those affecting the real estate industry;
•risks associated with possible disruption in our operations or the economy generally due to terrorism, natural disasters, epidemics or other events having a broad impact on the economy;
•adverse conditions in the areas where our investments or the properties underlying such investments are located and local real estate conditions;
•our portfolio may be concentrated in certain industries and geographies, and, as a consequence, our aggregate return may be substantially affected by adverse economic or business conditions affecting that particular type of asset or geography;
•limitations on our business and our ability to satisfy requirements to maintain our exclusion from registration under the Investment Company Act of 1940, as amended (the "Investment Company Act"), or to maintain our qualification as a REIT for U.S. federal income tax purposes;
•since there is no public trading market for our common shares, repurchase of common shares by us will likely be the only way to dispose of your shares. Our share repurchase plan provides shareholders with the opportunity to request that we repurchase their shares on a quarterly basis, but we are not obligated to repurchase any shares and may choose to repurchase only some, or even none, of the shares that have been requested to be repurchased in any particular quarter in our discretion. In addition, repurchases will be subject to available liquidity and other significant restrictions. Further, our board of trustees may make exceptions to, modify and suspend our share repurchase plan if, in its reasonable judgement, it deems such action to be in our best interest. As a result, our common shares should be considered as having only limited liquidity and at times may be illiquid;
•distributions are not guaranteed and may be funded from sources other than cash flow from operations, including, without limitation, borrowings, offering proceeds, the sale of our assets, and repayments of our real estate debt investments, and we have no limits on the amounts we may fund from such sources;
•the purchase and repurchase prices for our common shares are generally based on our prior month's NAV and are not based on any public trading market; and
•future changes in laws or regulations and conditions in our operating areas.
Although we believe the assumptions underlying the forward-looking statements, are reasonable, any of the assumptions could be inaccurate, and, as a result, the forward-looking statements based on those assumptions also could be inaccurate. In light of the these and other uncertainties, the inclusion of a projection or forward-looking statement in this Form 10-Q should not be regarded as a representation by us that our plans and objectives will be achieved. These forward-looking statements apply only as of the date of this Form 10-Q. Moreover, we assume no duty and do not undertake to update the forward-looking statements.
Overview
We are a Maryland statutory trust formed on May 22, 2024. We are managed by Principal Real Estate Investors, LLC, a Delaware limited liability company (the "Adviser" and, together with Principal Real Estate Europe Limited, "Principal Real Estate"). Principal Real Estate is the dedicated real estate group of Principal Global Investors Holding Company (US), LLC, a member company and affiliate of Principal Financial Group, which is a public company listed on the NASDAQ under the ticker symbol "PFG".
We are an externally advised, perpetual-life REIT formed to pursue the following investment objectives:
•provide current income in the form of regular, stable cash distributions to achieve an attractive distribution yield;
•preserve and protect invested capital, by focusing on high quality real assets with current cash-flow and/or limited business plan risk; and
•provide an investment alternative for shareholders seeking to allocate a portion of their long-term investment portfolios to commercial real estate ("CRE") debt with lower volatility than publicly traded securities and compelling risk-adjusted returns compared to fixed income alternatives.
Our investment strategy will be focused on originating, acquiring, financing managing and disposing of a portfolio of primarily commercial real estate ("CRE") debt investments, including senior mortgage loans, subordinated debt and other similar investments (collectively referred to as, "CRE Debt Investments"), diversified across both geography and asset class. To a lesser extent, the Company may invest in other real estate-related debt securities, including commercial mortgage-backed securities and collateralized loan obligations. Our CRE Debt Investments are expected to be primarily secured by properties in the U.S. and include multifamily, industrial and select other CRE asset classes, such as student housing, self-storage, life science and data center assets.
Our board of trustees at all times will have ultimate oversight and policy-making authority over us, including responsibility for governance, financial controls, compliance and disclosure. Pursuant to an advisory agreement between the Adviser and us (the "Advisory Agreement"), we have delegated to the Adviser the authority to source, evaluate and monitor our investment opportunities and make decisions related to the acquisition, management, financing and disposition of our assets, in accordance with our investment objectives, guidelines, policies and limitations, subject to oversight by our board of trustees.
We are structured as a non-listed, perpetual-life REIT, and therefore our securities are not listed on a national securities exchange and, as of the date of this Form 10-Q, there is no plan to list our securities on a national securities exchange. We are organized as a holding company and conduct our business primarily through our various subsidiaries. For the year ending December 31, 2025, the Company intends to elect and qualify to be taxed as a REIT under the Code, for U.S. federal income tax purposes and generally will not be subject to U.S. federal income taxes on our taxable income to the extent we annually distribute all of our REIT taxable income to shareholders and maintain our qualification as a REIT.
We are conducting a blind pool continuous private offering (the "Offering") of our common shares in reliance on an exemption from the registration requirements of the Securities Act of 1933, as amended (the "Securities Act"), to investors that are (i) accredited investors (as defined in Regulation D under the Securities Act) and (ii) in the case of common shares sold outside the United States, to persons that are not "U.S. persons" (as defined in Regulation S under the Securities Act).
We are not aware of any material trends or uncertainties, favorable or unfavorable, other than national economic conditions affecting real estate generally, that may be reasonably anticipated to have a material impact on either capital resources or the revenues or income to be derived from our real estate debt investments or real estate-related securities, other than those referred to in this Form 10-Q.
Q3 2025 Highlights
Fundraising and Distributions
•During the three months ended September 30, 2025, pursuant to the Offering, the Company sold an aggregate of 2,388,103 of its common shares for aggregate net consideration of approximately $50.6 million, plus applicable upfront selling commissions and dealer manager fees. The offer and sale of the shares was exempt from the registration provisions of the Securities Act by virtue of Section 4(a)(2) and Regulation D thereunder. In addition, during the three months ended September 30, 2025, the Company issued 493 shares pursuant to its distribution reinvestment plan (the "DRIP").
•During the three months ended September 30, 2025, the Company declared aggregate distributions of $0.545 per Class A, Class I, and Class F-I share. Refer to the Distributions section below for further details on the distributions declared.
Investments
•On July 17, 2025, the Company originated a $68.5 million floating rate first mortgage loan collateralized by a multifamily residential asset in Los Angeles, CA. The initial term of the loan is two years with three one-year extension options subject to satisfaction of certain predefined conditions by the borrower.
•On August 7, 2025, the Company originated a $35.6 million floating rate first mortgage loan collateralized by a multifamily residential asset in Richmond, TX. The initial term of the loan is two years with three one-year extension options subject to satisfaction of certain predefined conditions by the borrower.
Financings
•The Company did not borrow any additional proceeds under the terms of the Master Repurchase Agreement (together with the related transaction documents, the "GS Repurchase Agreement"), with Goldman Sachs Bank USA ("Goldman") for the three months ended September 30, 2025. The GS Repurchase Agreement currently provides for asset purchases by Goldman of up to $250.0 million. On July 10, 2025, the Company entered into an amendment that would increase the maximum facility size to $375.0 million; however, the conditions required for this increase had not yet been satisfied as of September 30, 2025. As of September 30, 2025 and December 31, 2024, the Company borrowed $161.7 million and $21.8 million, respectively, under the terms of the GS Repurchase Agreement.
•On June 27, 2025, the Company entered into a Master Repurchase Agreement (together with the related transaction documents, the "Citi Repurchase Agreement"), with Citibank, N.A. ("Citibank"), to finance the acquisition and origination by the Company of eligible loans as more particularly described in the Citi Repurchase Agreement. The Citi Repurchase Agreement provides for asset purchases by Citibank of up to $250.0 million (the "Citi Facility"). As of September 30, 2025, the Company had borrowings $115.6 million under the Citi Facility.
Results of Operations
The following table sets forth information regarding our consolidated results of operations for the three months ended September 30, 2025 and June 30, 2025 (amounts in thousands):
| For the Three Months Ended September 30, 2025 | For the Three Months Ended June 30, 2025 | Change | |||||||||
| Revenues | |||||||||||
| Interest income | $ | 6,966 | $ | 4,558 | $ | 2,408 | |||||
|
Other revenue
|
1,041 | 500 | 541 | ||||||||
| Total revenue | 8,007 | 5,058 | 2,949 | ||||||||
| Expenses | |||||||||||
| Interest expense | 4,400 | 3,264 | 1,136 | ||||||||
| General and administrative | 540 | 627 | (87) | ||||||||
| Financing fees | 351 | 612 | (261) | ||||||||
| Management fees | 176 | 88 | 88 | ||||||||
| Performance fees | 16 | - | 16 | ||||||||
| Total expenses | 5,483 | 4,591 | 892 | ||||||||
| Unrealized gains (losses) | |||||||||||
| Unrealized gain (loss) on loans receivable | 288 | (250) | 538 | ||||||||
| Unrealized gain (loss) on loans payable | (111) | 201 | (312) | ||||||||
| Total unrealized gains (losses) | 177 | (49) | 226 | ||||||||
| Income (loss) before income tax expense (benefit) | 2,701 | 418 | 2,283 | ||||||||
| Income tax expense (benefit) | (17) | 17 | (34) | ||||||||
| Net income (loss) | $ | 2,718 | $ | 401 | $ | 2,317 | |||||
•During the threemonths ended September 30, 2025, revenues totaled $8.0 million, and consisted of interest income of $7.0 million and other revenue of $1.0 million (predominantly origination fees). The increase from the $5.1 million in total revenue recognized during the three months ended June 30, 2025 was due to origination fee income recognized in current quarter on new loans and a full quarter of interest income on recent loan closings.
•During the three months ended September 30, 2025, interest expense and financing fees were $4.4 million and $0.4 million, respectively, and $3.3 million and $0.6 million, respectively, for the three months ended June 30, 2025. The increase in interest expense during the three months ended September 30, 2025 as compared to the three months ended June 30, 2025 is due to additional loan production, which results in additional loans being placed on the GS Facility and Citi Facility. The decrease in financing fees during the three months ended September 30, 2025 as compared to the three months ended June 30, 2025 is due to fewer loans being placed on the GS Facility and Citi Facility than in the prior quarter and the prior quarter included $0.4 million of expenses associated with the closing of the Citi Facility.
•During the three months ended September 30, 2025, general and administrative fees were approximately $0.5 million and primarily related to operating costs incurred during the period. These costs have been advanced by the Adviser and paid on behalf of the Company. The Company will commence reimbursement of the advances to the Adviser in March 2026 and will pay the balance due at that time, ratably in 60 monthly installments thereafter. The Company began recognizing operating costs incurred by the Adviser on March 1, 2025, the date of the Initial Retail Closing of the Offering.
•Management fees and performance fees are earned by our Adviser for providing services pursuant to the Advisory Agreement. During the three months ended September 30, 2025 and June 30, 2025, management fees were $176.0 and $88.0, respectively. Performance fees earned during the three months ended September 30, 2025 and June 30, 2025 were $16.0 and $0.0 respectively.
Financial Condition
Investment Activities
As of September 30, 2025, the Company had originated 10 CRE Debt Investments. The following table details the statistics of the Company's investments in loans receivable portfolio as of September 30, 2025 (amounts in thousands):
|
Loan / Property Type
|
Location |
Origination Date(1)
|
Total Loan |
Principal Balance Outstanding
|
Fair Value
|
Cash Coupon(2)
|
Maximum Maturity(3)
|
LTV(4)
|
||||||||||||||||||||||||
| Senior Loans | ||||||||||||||||||||||||||||||||
| Industrial | Castle Rock, CO | 12/10/2024 | $25,000 | $25,000 | $25,005 | 1-Month Term SOFR | + | 3.25% | 1/1/2030 | 72% | ||||||||||||||||||||||
| Industrial | Puyallup, WA | 12/16/2024 | $32,500 | $30,072 | $30,122 | 1-Month Term SOFR | + | 3.25% | 1/1/2029 | 53% | ||||||||||||||||||||||
| Industrial | Olathe, KS | 12/30/2024 | $40,728 | $39,185 | $39,195 | 1-Month Term SOFR | + | 3.40% | 1/1/2030 | 75% | ||||||||||||||||||||||
| Industrial | Greenwood, IN | 12/30/2024 | $12,637 | $10,197 | $10,197 | 1-Month Term SOFR | + | 3.85% | 1/1/2030 | 63% | ||||||||||||||||||||||
| Industrial | Mesa, AZ | 12/30/2024 | $19,139 | $17,620 | $17,620 | 1-Month Term SOFR | + | 3.70% | 1/1/2030 | 81% | ||||||||||||||||||||||
| Industrial | Richmond, CA | 12/30/2024 | $27,017 | $24,292 | $24,292 | 1-Month Term SOFR | + | 3.85% | 1/1/2030 | 75% | ||||||||||||||||||||||
| Residential | Tempe, AZ | 2/14/2025 | $76,500 | $75,344 | $75,344 | 1-Month Term SOFR | + | 3.25% | 3/1/2030 | 77% | ||||||||||||||||||||||
| Residential | Spring Hill, TN | 6/13/2025 | $50,000 | $50,000 | $50,108 | 1-Month Term SOFR | + | 3.35% | 7/1/2030 | 65% | ||||||||||||||||||||||
| Residential | Los Angeles, CA | 7/17/2025 | $68,500 | $68,500 | $68,500 | 1-Month Term SOFR | + | 3.25% | 8/1/2030 | 80% | ||||||||||||||||||||||
| Residential | Richmond, TX | 8/7/2025 | $35,600 | $35,600 | $35,645 | 1-Month Term SOFR | + | 3.25% | 9/5/2030 | 75% | ||||||||||||||||||||||
| $387,621 | $375,810 | $376,028 | ||||||||||||||||||||||||||||||
(1)Origination date represents the date the loan investment was initially originated or acquired by the Company.
(2)Cash coupon is expressed as the relevant floating benchmark rate (1-Month Term SOFR) plus the spread in effect as of September 30, 2025. The effective 1-Month Term SOFR rate for the Company's loan portfolio ranged from 4.29% to 4.32% as of September 30, 2025.
(3)Maximum maturity assumes all extension options are exercised by the borrower; however, loans may be repaid prior to such date.
(4)The LTV ratio for each investment is based on the most recent outstanding loan balance and the most recent collateral value.
Financing Activities
We finance the majority of our CRE Debt Investments portfolio through line of credit and repurchase agreements. The table below summarizes our borrowings as of September 30, 2025 (amounts in thousands):
| Description |
Weighted Average Interest Rate(1)
|
Maximum Facility Size | Available Capacity | Debt Amount Outstanding | Fair Value of Debt | Fair Value of Collateral | Current Maturity |
Maximum Maturity(2)
|
||||||||||||||||||
| Goldman Repurchase Agreement | 6.32% | $250,000 | $88,323 | $161,677 | $161,677 | $221,775 | 12/17/2026 | 12/17/2031 | ||||||||||||||||||
| Citi Repurchase Agreement | 5.88% | $250,000 | $134,425 | $115,575 | $115,575 | $154,253 | 6/27/2027 | 6/27/2028 | ||||||||||||||||||
| JPM Line of Credit | 6.41% | $150,000 | $43,000 | $2,000 | N/A | N/A | 11/25/2025 | 5/26/2026 | ||||||||||||||||||
(1)Represents weighted average interest rate as of period end. Borrowings under our repurchase agreement carry interest at one-month Term SOFR plus a spread.
(2)Maximum maturity assumes all extension options are exercised. The extensions are subject to satisfaction of certain predefined conditions including compliance with certain financial and administrative covenants as well as payment of applicable extension fees.
Liquidity and Capital Resources
Liquidity is a measure of our ability to meet our cash requirements, including ongoing commitments to repay borrowings, fund and maintain our assets and operations, make new investments where appropriate, pay distributions to our shareholders and other general business need. We closely monitor our liquidity position and believe that we have sufficient current liquidity and access to additional liquidity to meet our financial obligations for at least the next 12 months.
The Anchor Investors have agreed, from time to time, to purchase an aggregate amount of $150 million in Class A shares, in each case, at a price per share equal to the most recently determined NAV of Class A shares. We expect to generate cash primarily from (i) the net proceeds of the Offering, (ii) cash flows from our operations, (iii) any financing arrangements we may enter into in the future and (iv) any future offerings of our equity or debt securities. As of September 30, 2025, the Anchor Investors have purchased $100.0 million in our Class A shares.
We expect to generate cash primarily from (i) the net proceeds of the Offering, (ii) cash flows from our operations, (iii) any financing arrangements we may enter into in the future and (iv) any future offerings of equity and / or debt securities.
Our primary use of cash will be for (i) origination or acquisition of commercial mortgage loans and other commercial debt investments, CMBS and other commercial real estate-related debt investments, (ii) the cost of operations (including the management fee and performance fee), (iii) debt service of any borrowings, (iv) periodic repurchases, including under our share purchase plan (as described herein), and (v) cash distributions (if any) to the holders of our shares to the extent authorized by our board of trustees and declared by us.
The Company will seek to enter into bank debt, credit facility, and / or other financing arrangements on at least customary and market terms; however, such incurrence would be subject to prevailing market conditions, the Company's liquidity requirements, contractual and regulatory restrictions and other factors. As of September 30, 2025, the Company had established loan repurchase facilities with Goldman and Citibank for $250 million and $250 million, respectively. The Company has pledged four residential and six industrial loans as collateral and based on the value of the loans pledged as collateral and the advanced rates attributed to each loan by the lender, the Company had $161.7 million and $115.7 million in outstanding debt with Goldman and Citibank, respectively, as of September 30, 2025. Refer to Note 3 - "Investments in Loans Receivable" and Note 4 - "Debt" for further information.
As of September 30, 2025 and December 31, 2024, respectively, the Company had cash and cash equivalents of $9.7 million and $11.9 million, and an approved, but undrawn credit capacity, which is the amount the Company is permitted to borrow less the amounts outstanding, of $88.3 million and $134.4 million with Goldman and Citibank, respectively. These amounts do not include $50.0 million and $140.0 million of undrawn capacity under Anchor Investors' equity commitment which represents readily available liquidity as of September 30, 2025 and December 31, 2024, respectively.
Cash Flows
The following table provides a breakdown of the net change in our cash and cash equivalents and restricted cash, for the nine months ended September 30, 2025 (amounts in thousands):
| Amounts | |||||
| Net cash provided by operating activities | $ | 2,022 | |||
| Net cash used in investing activities | (225,415) | ||||
| Net cash provided by financing activities | 228,371 | ||||
| Net decrease in cash and cash equivalents and restricted cash | $ | 4,978 | |||
Net cash provided by operating activities was $2.0 million and primarily comprised of interest income and origination fee income, partially being offset by increases in interest income receivables and paid-in-kind interest income during the period.
Net cash used in investing activities was $(225.4) million and was related to the loan originations and funding activity during the period.
Net cash provided by financing activities was $228.4 million and was related to the additional proceeds from and repayment of the loan payable and the proceeds from the Offering during the period.
NAV and NAV Per Share Calculation
For the purposes of the monthly NAV computations, our board of trustees, including a majority of our independent trustees, adopted valuation guidelines that contain a comprehensive set of methodologies used by the Adviser and our independent valuation advisor. These guidelines are designed to produce a fair and accurate estimate of the price that would be received for our investments in an arm's-length transaction between a willing buyer and a willing seller in possession of all material information about our investments. Periodically, our board of trustees, including a majority of our independent trustees, will review the appropriateness of our valuation procedures. From time to time, our board of trustees, including a majority of our independent trustees, may adopt changes to the valuation guidelines if it (1) determines that such changes are likely to result in a more accurate reflection of NAV or a more efficient or less costly procedure for the determination of NAV without having a material adverse effect on the accuracy of such determination or (2) otherwise reasonably believes a change is appropriate for the determination of NAV. Refer to Item 7. "Management's Discussion and Analysis of Financial Conditions and Results of Operations" on our Annual Report on Form 10-K for the year ended December 31, 2024 for further information on the valuation methods used for the purposes of determining the valuations of our assets and liabilities, calculating related unrealized gains and losses and our monthly NAV.
With regard to NAV calculations, the same fair values of assets and liabilities determined by the application of the methods cited above are generally used in monthly NAV calculations. To calculate our NAV for purposes of establishing a purchase and repurchase price for our common shares, we have adopted a model that calculates the fair values of our assets and liabilities in accordance with our valuation guidelines. Because these fair value calculations involve significant professional judgment in the application of both observable and unobservable inputs, the calculated fair value of our assets may differ from their actual realizable value or future fair value. While we believe our NAV calculation methodologies are consistent with standard industry practices, there is no rule or regulation that requires we calculate NAV in a certain way. As a result, other REITs may use different methodologies or assumptions to determine NAV. In addition, NAV is not a measure used under GAAP and the valuations of and certain adjustments made to our assets and liabilities used in the determination of NAV differ from GAAP. Shareholders should not consider NAV to be equivalent to shareholders' equity or any other GAAP measure. The calculation of our NAV is intended to be a calculation of the fair value of our assets less our outstanding liabilities as described below and will likely differ from the book value of our equity reflected in our financial statements.
The board of trustees of the Company has delegated to the Adviser the responsibility for monitoring significant events that may materially affect the values of our facilities for determining whether the existing valuations should be re-evaluated prior to the next scheduled monthly valuation in light of such significant events.
Each share class will have an undivided interest in our assets and liabilities, other than class-specific shareholder servicing fees, distributions payable, the management fee and the performance fee. In accordance with the valuation guidelines, our fund administrator will calculate our NAV per share for each class as of the last calendar day of each month, including the estimated fair value of (1) real estate debt and other investments owned by us and (2) any other assets and liabilities. Because shareholder servicing fees, distributions payable, the management fee and the performance fee allocable to a specific class of shares will only be included in the NAV calculation for that class, the NAV per share for our classes of shares may differ.
The monthly NAV for each class of shares will be based on the net asset values of our investments, the addition of any other assets (such as cash on hand), and the deduction of any other liabilities (including distributions payable, accrued management fees, accrued performance fees and the deduction of any shareholder servicing fees specifically applicable to such class of shares). At the end of each month, before taking into consideration repurchases or class-specific expense accruals for that month, any change in our aggregate NAV (whether an increase or decrease) is allocated among each class of shares based on each class's relative percentage of the previous aggregate NAV plus issuances of shares that were effective on the first calendar day of such month. The NAV calculation is available generally within 15 calendar days after the end of the applicable month. Changes in monthly NAV includes, without limitation, accruals of our net portfolio income, interest expense, the management fee, the performance fee, distributions, unrealized/realized gains and losses on assets, any applicable organization and offering expenses and any expense reimbursements. Changes in monthly NAV also includes material non-recurring events occurring during the month. On an ongoing basis, the Adviser will adjust the accruals to reflect actual operating results and the outstanding receivable, payable and other account balances resulting from the accumulation of monthly accruals for which financial information is available. The operating expenses and organizational and offering expenses which are advanced by the Adviser to be reimbursed by us will not be included in such calculations until reimbursed to the Adviser.
For purposes of calculating our NAV, neither (1) organization and offering expenses paid by the Adviser through the first anniversary of the Initial Retail Closing, nor (2) operating expenses paid by the Adviser, incurred by us during the period through the first anniversary of the Initial Retail Closing, are recognized as expenses or as a component of equity and reflected in our NAV until we reimburse the Adviser for these costs. After the first anniversary of the Initial Retail Closing of the Offering, we will reimburse the Adviser for any organization and offering expenses and operating expenses that it incurs on behalf of us as and when incurred (or promptly thereafter).
Following the aggregation of the net asset values of our investments, the addition of any other assets (such as cash on hand) and the deduction of any other liabilities, our fund administrator incorporates any class-specific adjustments to NAV, including additional issuances and repurchases of shares and accruals of class-specific distributions, management fees, performance fees and shareholder servicing fees. The declaration of distributions will reduce the NAV for each class of our shares in an amount equal to the accrual of our liability to pay any such distribution to our shareholders of record of each class. NAV per share for each class of shares is calculated by dividing such class's NAV at the end of each month by the number of shares outstanding for that class at the end of such month.
The following table provides a breakdown of the major components of our total NAV as of September 30, 2025 (amounts in thousands, except for share data):
| Amounts | |||||
| Cash and cash equivalents | $ | 9,748 | |||
| Restricted cash | 11,361 | ||||
| Investments in loans receivable, at fair value | 376,028 | ||||
| Accrued interest receivable | 2,371 | ||||
| Loans payable, at fair value | (277,252) | ||||
| Escrow deposits | (11,357) | ||||
| Due to adviser | (1,012) | ||||
| Line of credit, at cost | (2,000) | ||||
| Interest payable | (756) | ||||
| Distributions payable | (673) | ||||
| Net Asset Value | $ | 106,458 | |||
| Number of outstanding shares (all classes) | 4,984,207 | ||||
The following table reconciles U.S. GAAP shareholders' equity and redeemable common shares per our Condensed Consolidated Balance Sheets to our NAV as of September 30, 2025 (amounts in thousands):
| September 30, 2025 | Amounts | ||||
| Shareholders' equity and redeemable common shares | $ | 102,150 | |||
| Adjustments: | |||||
|
Organization and offering costs(1)
|
2,499 | ||||
|
Operating expenses advanced by Adviser(2)
|
1,805 | ||||
| Unearned Trustee Stock Compensation - Class E Common Shares | 4 | ||||
| NAV | $ | 106,458 | |||
(1)This represents the unamortized amount of organization and offering costs advanced by the Adviser. The Adviser has agreed to advance organization and offering expenses on behalf of the Company (including legal, accounting, and other expenses attributable to the organization, but excluding upfront selling commissions, dealer manager fees and shareholder servicing fees) through the first anniversary of the date of the Initial Retail Closing of the Offering. The Company will reimburse the Adviser for all such advanced expenses ratably over a 60-month period following the first anniversary of the Initial Retail Closing of the Offering.
(2)This represents the unamortized amount of operating costs advanced by the Adviser. The Adviser has agreed to advance certain of the Company's operating expenses through the first anniversary of the Initial Retail Closing of the Offering. The Company will reimburse the Adviser for such advanced expenses ratably over the 60 months following the first anniversary of the Initial Retail Closing of the Offering. Operating expenses incurred after the first anniversary of the Initial Retail Closing of the Offering will be paid by the Company as incurred.
The following table provides a breakdown of our total NAV and NAV per share by class as of September 30, 2025 (amounts in thousands, except for share and per share data):
| Class I Shares | Class F-I Common Shares | Class A Shares | Total | |||||||||||
| Net asset value | $ | 1 | $ | 4,815 | $ | 101,642 | $ | 106,458 | ||||||
| Number of outstanding shares | 51 | 235,397 | 4,748,759 | 4,984,207 | ||||||||||
| NAV per share as of September 30, 2025 | $ | 20.34 | $ | 20.46 | $ | 21.40 | ||||||||
Distributions
Any distributions we make will be at the discretion of our board of trustees, considering factors such as our earnings, cash flow, capital needs and general financial condition. As a result, our distribution rates and payment frequency may vary from time to time. Shareholders are not entitled to receive a distribution on shares that are repurchased prior to the applicable time of the record date.
Our board of trustees' discretion as to the payment of distributions will be directed, in substantial part, by its determination to cause us to comply with the REIT requirements. To maintain our qualification as a REIT, we generally are required to make aggregate annual distributions to our shareholders of at least 90% of our REIT taxable income, determined without regard to the distributions-paid deduction and excluding net capital gains.
Beginning January 31, 2025, we have declared monthly distributions for each class of common shares then-outstanding, which are generally paid twenty days after month-end. Each class of our common stock received the same gross distribution per share if then-outstanding. The net distribution rates per share vary for each class based on the applicable shareholder servicing fee, which is deducted from the gross distribution per share and paid to the Dealer Manager. The table below details the net distribution for each of our share classes for the ninemonths ended September 30, 2025:
| Class I Common Shares | Class F-I Common Shares | Class A Common Shares | |||||||||
| January 31, 2025 | $ | - | $ | - | $ | 0.1350 | |||||
| February 28, 2025 | $ | - | $ | - | $ | 0.1350 | |||||
| March 31, 2025 | $ | 0.2300 | $ | 0.2300 | $ | 0.2300 | |||||
| April 30, 2025 | $ | 0.1350 | $ | 0.1350 | $ | 0.1350 | |||||
| May 31, 2025 | $ | 0.1350 | $ | 0.1350 | $ | 0.1350 | |||||
| June 30, 2025 | $ | 0.1350 | $ | 0.1350 | $ | 0.1350 | |||||
| July 31, 2025 | $ | 0.2300 | $ | 0.2300 | $ | 0.2300 | |||||
| August 31, 2025 | $ | 0.1800 | $ | 0.1800 | $ | 0.1800 | |||||
| September 30, 2025 | $ | 0.1350 | $ | 0.1350 | $ | 0.1350 | |||||
| Totals | $ | 1.1800 | $ | 1.1800 | $ | 1.4500 | |||||
The following table summarizes our distributions declared during the nine months ended September 30, 2025 (in thousands):
| For the nine months ended September 30, 2025 | ||||||||
| Amount | % | |||||||
| Distributions | ||||||||
| Payable in cash | $ | 3,728 | 100.0 | % | ||||
| Reinvested in shares | 13 | - | % | |||||
| Total distributions | $ | 3,741 | 100.0 | % | ||||
| Sources of Distributions | ||||||||
|
Cash flow from operating activities(1)
|
$ | 3,741 | 100.0 | % | ||||
| Offering proceeds | - | - | % | |||||
| Total sources of distributions | $ | 3,741 | 100.0 | % | ||||
| Cash flows from operating activities | $ | 2,022 | ||||||
(1)As of September 30, 2025, our inception to date cash flows from operating activities funded 100% of our distributions to date.
Critical Accounting Estimates
Our discussion and analysis of our financial condition and results of operations is based upon our condensed consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of the financial statements in accordance with GAAP involves significant judgments and assumptions and requires estimates about matters that are inherently uncertain. There have been no material changes to our Critical Accounting Estimates, including significant accounting policies that we believe are the most affect by our judgment, estimates and assumptions, which are described in our Annual Report on Form 10-K for the year ended December 31, 2024.
Recent Accounting Developments
Refer to Note 2 - "Summary of Significant Accounting Policies" to the financial statements for a discussion of recent accounting developments and the expected impact to the Company.
Subsequent Events
Subsequent to September 30, 2025 through the date hereof, the Company issued the following shares (amounts in thousands, except for share data):
| Shares | Gross Proceeds | |||||||
| Class I Common Shares | 10,080 | 205 | ||||||
| Class F-I Common Shares | 125,619 | 2,569 | ||||||
| Total | 135,699 | $ | 2,774 | |||||
Subsequent to September 30, 2025 through the date hereof, the Company also issued 145 Class F-I Common Shares pursuant to its DRIP for gross proceeds of $3 (amounts in thousands, except for share data).
Principal Credit Real Estate Income Trust published this content on November 10, 2025, and is solely responsible for the information contained herein. Distributed via Edgar on November 10, 2025 at 21:37 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]