Investing in Private Debt in Real Estate: Insights from Kirkland Capital Group
Why Smart Investors Are Turning to Private Debt in Real Estate
If you're looking for stable income, capital preservation, and uncorrelated returns, private real estate debt may be the solution your portfolio needs. In a market where traditional income strategies are volatile and equity valuations feel stretched, this asset class offers a compelling alternative.
One such opportunity lies in private debt—specifically, private debt in real estate, where investors lend directly to property owners and developers in exchange for interest income backed by real assets.
Within this broader market, Kirkland Capital Group has carved out a unique niche: micro-balance commercial real estate lending. These are bridge loans —typically between $200,000 and $1.5 million—targeted at underserved borrowers in secondary and tertiary markets. This segment is frequently ignored by institutional lenders due to the small loan size or the complexity that local hard money shops find challenging, creating a unique inefficiency that we are well-positioned to capitalize on.
In a recent episode of the Streetsmart Podcast, Chris Carsley, Chief Investment Officer of Kirkland Capital Group, shared a deep dive into the firm’s private debt strategy—and why it’s resonating with investors looking for stable income, capital preservation, and uncorrelated returns.
🎧 Want to hear the full conversation? Listen to the Streetsmart Podcast episode featuring Chris Carsley below.
Whether you're a seasoned investor or just beginning to explore private debt, this article distills the key takeaways from that conversation and explains why our strategy is worth your attention.
What Is Private Real Estate Debt?
Private real estate debt involves lending capital to property owners or developers, secured by real estate assets. Unlike equity investments, where returns depend on appreciation or business performance, debt investors earn income through interest payments—often with lower volatility and downside protection.
📘 Want to learn the basics? Check out our “Private Debt 101” article.
Why Micro-balance Bridge Loans Are a Hidden Gem
Targeting Inefficiencies for Higher Returns
We focus on secondary and tertiary markets—areas often overlooked by traditional lenders. This creates a supply-demand imbalance that allows us to maintain pricing power while applying strong underwriting standards.
“We’re not trying to be a $500 million fund,” Chris explains. “We’re targeting $80 to $100 million because we want to stay in this inefficiency.”Consistent, Real Returns
We aim for net compounded annual returns of 10–12%. Since inception, we have consistently delivered an annualized compounded net return exceeding 10%, showcasing the enduring quality of our strategy even without using leverage. Unlike some funds, we do not accrue interest on non-performing loans, ensuring that reported returns are based on actual realized performance.
Equity-like returns with debt-level risk: Dream or reality? Find out here.
How Our Investor’s Capital is Protected
Conservative Valuations and First-Lien Security
We lend only against “as-is” property values—no speculative future valuations. All loans are first-lien and full-recourse, with personal guarantees from borrowers to protect our investor’s capital.
“If a property is worth $500,000 today, that’s the number we use. We don’t care about what it might be worth after renovations,” Chris says. “That discipline protects our investors.”Proactive Default Management
When loans become non-performing, we act quickly. We’ve built a legal network across multiple states to manage foreclosures, deed-in-lieu agreements, and property sales. Our robust processes and procedures ensure that we can effectively handle defaults and protect our investors' interests.
Case in Point:
In early 2024, we had several loans classified as non-performing. Within a few months, we had resolved half through a mix of forbearance agreements, property sales, and deed-in-lieu transactions. One medical office building was taken back through deed-in-lieu and is now under contract for sale.
“Default doesn’t mean loss,” Chris notes. “Sometimes it means opportunity. We’ve had loans go non-performing, restructure them, and come out with even better returns.”Diversification by Design
Our portfolio includes dozens of loans across commercial asset classes:
Multifamily (5+ units)
Light industrial
Retail
Medical office
Self-storage
Mixed-use commercial
We've established guidelines to ensure that no single property type exceeds 20% of the portfolio, and no state exceeds 25%. Borrower concentration is also tightly managed, with only one borrower holding more than one loan. These guidelines are designed to minimize risk and ensure that the portfolio is not overly dependent on any single loan or borrower
“We’ve learned from the fix-and-flip world. If one borrower goes sideways and they’re a big part of your book, it hurts. We avoid that,” Chris explains.The Borrower Profile: Why They Come to Kirkland Capital Group
Borrowers typically fall into two categories:
Asset-rich, cash-poor investors looking to acquire properties.
Owners needing bridge financing to complete light renovations or improve the net operating income (NOI) of the property to stabilize the property before refinancing.
Many borrowers we’ve talked to have been let down by banks or other lenders—often at the last minute. We step in with speed, clarity, and structure. Our streamlined processes ensure that we can act relatively quickly without compromising on quality. We have rigorous due diligence procedures in place to thoroughly evaluate each loan application, ensuring that every decision is grounded in comprehensive analysis and sound judgment.
“We’re often the only ones at the table,” Chris says. “They’ve been ghosted by a bank or had a rug pulled by another lender.”How We Evaluate Each Opportunity
Every loan needs to have a clear, realistic exit plan. We model borrower business plans, stress-tests DSCR (Debt Service Coverage Ratio) assumptions, and evaluate refinance feasibility. We perform our own valuations and cross-check them with third-party valuations to ensure a more comprehensive analysis.
If the numbers don’t work, we are not afraid to walk away.
“We had a great 13-unit property in Yakima, but the borrower overpaid. We ran the model and said, ‘You won’t hit your NOI target in time to refinance.’ So we passed,” Chris recalls.Technology-Driven Underwriting
While we lend to most states, we don’t need to be local to underwrite effectively. As mentioned, we use a combination of third-party services and data aggregation tools to evaluate properties with a level of precision that rivals (and often exceeds) traditional local underwriting.
“The data we have access to today didn’t exist 7–8 years ago,” Chris explains. “We can underwrite with more precision than ever before.”This allows us to assess properties in Georgia, Texas, Ohio, or anywhere in the country with the same rigor as if they were in our own backyard.
Disciplined Investment Approach
Chris and our Chief Operating officer, Brock Freeman, have learned to stay disciplined. Our investment discipline is rooted in a clear mandate: micro-balance commercial real estate debt. We don’t chase trends, stretch into unfamiliar asset classes, or compromise underwriting standards to boost short-term returns.
“We’ve seen funds suddenly add preferred equity or other strategies they weren’t doing before. That’s not us. We stick to what we know,” Chris says.For investors, this means they are not exposed to strategy drift or speculative bets. They are investing in a fund that knows its edge—and sticks to it.
Why Private Debt Matters for Your Portfolio
✅ Uncorrelated Returns in Volatile Markets
Private real estate debt is largely insulated from the volatility of public markets. Because returns are generated through contractual interest payments—not market speculation—investors benefit from predictable income that’s uncorrelated with equities or bonds.
“We’re not chasing market beta,” Chris explained. “We’re underwriting real assets with real cash flows.”✅ Access to Inefficient Niche Markets
Our focus on micro-balance loans in secondary and tertiary markets provides access to an inefficient niche with limited institutional competition to generate excess returns. This creates inefficiencies that allow for better pricing, stronger terms, and higher yields—without taking excessive risk.
“Our niche gives us leverage in structuring deals and protecting investor capital.”✅ Conservative Underwriting = Capital Preservation
Our conservative underwriting practices focus on capital preservation, providing peace of mind for investors while generating consistent and stable income.
“We don’t underwrite to hope,” Chris emphasized. “We underwrite to what’s real.”Ready to Learn More?
If you're seeking stable, high-yield, uncorrelated returns backed by real assets—and want access to a niche market that institutional capital often overlooks—Kirkland Capital Group’s private real estate debt strategy could be the right fit for your portfolio.
🔍 Want to see how our performance compares? Visit our Performance Page for detailed returns, risk metrics, and comparisons to public and private benchmarks.
📞 Schedule a call with Chris Carsley. Get your questions answered directly by our Chief Investment Officer and explore how this strategy aligns with your investment goals.
📄 Download our term sheet below for an overview of our investment strategy, performance, team, and fund highlights