PRINCIPAL REAL ESTATE INCOME FUND Principal Real Estate Income Fund (PGZ)
Fund Update
All data as of 11/30/2023
The Principal Real Estate Income Fund seeks to provide high current income, with capital appreciation as a secondary objective, by investing in higher- yielding debt and equity commercial real estate-related investments.
- The Fund will rely on the Sub-advisor's experience in the U.S. Commercial Mortgage-Backed Securities (CMBS) and global real estate-related securities markets to invest in both asset classes
- Potential for attractive current income provided by allocation to debt securities while equity allocation offers income with potential capital appreciation
- Dynamic investment strategy provides flexibility to position the Fund for success based on the market outlook of the Fund's investment sub-adviser
Sector allocations (% of total portfolio)
5.17%
Quarterly manager commentary
(as of 9/30/23)
Risk sentiment soured as soft landing was confronted by a "higher-for-longer" rate environment and the implications for discount rates, growth assumptions, and asset values. The downward trend in inflation stalled amidst surprising GDP growth, a bump in jobs, and surging oil. The 10-year US Treasury rate rose
12.52%
Commercial Mortgage Backed Securities
U.S. Real Estate Securities
International Real Estate Securities
0.7% and real yields approached a 15-year high. Against this backdrop, the portfolio's holdings of Commercial Mortgage-Backed Securities posted a quarterly return of 0.7% while global real estate securities were down -5.2% (return figures
20.53%61.78%
Short Term Investments
Monthly performance
Total returns1 | Cumulative | Annualized | ||||||
Since | ||||||||
Fund | 1 mo. | 3 mo. | YTD | 1 yr. | 3 yr. | 5 yr. | 10 yr. inception2 | |
Net Asset | 6.78% | -0.73% | -7.17% | -10.37% | -1.95% | -3.69% | 2.91% | 3.21% |
Value (NAV)3 | ||||||||
Market Price4 | 8.45% | 1.74% | 1.33% | -7.08% | 2.54% | -3.11% | 3.21% | 1.71% |
Bloomberg | ||||||||
U.S.Aggregate | 4.53% | 0.26% | 1.64% | 1.18% | -4.47% | 0.71% | 1.37% | 1.48% |
Bond Index | ||||||||
Morningstar | ||||||||
Developed | 9.41% | 1.42% | 17.14% | 12.66% | 6.84% | 9.92% | 8.63% | 9.86% |
Markets Index |
Performance data quoted represents past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when sold or redeemed, may be worth more or less than the original cost. Current performance data may be higher or lower than actual data quoted. For the most current month-end performance data please call 855.838.9485.
Total annual expense ratio as a percentage of net assets attributable to common shares including interest expense, as of April 30, 2023, 4.98%.
Total annual expense ratio as a percentage of net assets attributable to common shares excluding interest expense, as of April 30, 2023, 2.44%.
- Total returns assume reinvestment of all distributions.
- Fund inception date of June 25, 2013.
- Performance returns are net of management fees and other Fund expenses.
- Market price is the value at which the Fund trades on an exchange. This market price can be more or less than its NAV.
reported on a gross, unlevered basis).
Commercial real estate valuations are still under pressure from higher rates, tight cap rate spreads, and NOI challenges. Office remains stressed although the longer-term outlook may improve over time as return-to-office takes hold, construction deliveries fall, and obsolete space is removed via demolition or conversion. More cyclical property types generally fared better early in the quarter, although the pressure from higher rates was felt broadly as the quarter progressed.
Real estate risk premiums are elevated compared to other asset classes, and investors are showing more interest in CMBS amidst substantial excess spreads. REITs tend to perform better against equities in the later stages of the rate hike cycle with their relative outperformance becoming more marked as rates peak and fall. Volatility
is likely to persist given elevated market uncertainty, but longer-term returns may benefit from currently wide risk premiums.
www.principalcef.com
1.855.838.9485 | www.principalcef.com
All data as of 11/30/2023
Top 10 holdings (% of total portfolio)
Commercial Mortgage Trust 2014-UBS5 | 3.31% |
Benchmark 2022-B36 Mortgage Trust | 2.64% |
2022-B36 | |
Commercial Mortgage Trust 2013-CR6 | 2.63% |
Citigroup Commercial Mortgage Trust | 2.62% |
2022-GC482022-GC48 | |
COMM 2012-CCRE3 Mortgage Trust | 2.46% |
2012-CR3 | |
Digital Realty Trust, Inc. | 2.37% |
Commercial Mortgage Trust 2014-UBS2 | 2.33% |
BMO 2022-C1 Mortgage Trust 2022-C1 | 2.25% |
Goldman Sachs Mortgage Securities Trust | 2.16% |
2010-C1 | |
BBCMS Mortgage Trust 2022-C182022-C18 | 2.10% |
Holdings are subject to change. |
Share information
Symbol NYSE | PGZ |
Inception date | 6/25/13 |
Shares Outstanding | 6,694,109 |
Inception Share Price | $20.00 |
Market Price | $9.32 |
Inception NAV | $19.10 |
NAV | $10.37 |
Fund Premium/Discount | -10.13% |
Distribution details
Current distribution (monthly) | $0.105 |
Annualized distribution rate | 13.52% |
Distributions may be paid from sources of income other than ordinary income, such as net realized short-term capital gains, net realized long-term capital gains
and return of capital. Based on current estimates, we anticipate the current distribution has been paid from ordinary income. The actual amounts and sources of the amounts for tax reporting purposes will depend upon the Fund's investment experience during the remainder of its fiscal year and may be subject to changes based on tax regulations. If a distribution includes anything other than net investment income, the Fund provides
a Section 19(a) notice of the best estimate of its distribution sources at that time. These estimates may not match the final tax characterization (for the full year's distributions) contained in shareholders' 1099- DIV forms after the end of the year. The annualized distribution rate is the monthly per share distribution times 12, divided by the end-of-month market price.
Portfolio details
Net assets | $69.40 million |
Number of holdings | 122 |
Non-domestic holdings (%) | 12.52% |
Wtd. avg. debt security coupon1 | 3.73% |
Wtd. avg. debt security market price2 | $65.91 |
Wtd. avg. equity security dividend yield3 | 5.22% |
Leverage ratio** | 31.76% |
Annualized cost of leverage | 6.01% |
Wtd. avg. debt security average life4 | 4.23 yrs |
Wtd. avg. debt security duration5 | 3.08 yrs |
1 Represents the weighted average annualized coupon of the portion of the portfolio invested in debt securities, excluding interest-only securities. 2 Represents the weighted average market price of the portion of the portfolio invested in debt securities, excluding interest- only securities. 3 Represents the weighted average annualized dividend yield of the portion of the portfolio invested in equity securities. 4 Represents the weighted average average life of the portion of the portfolio invested in debt securities. 5 Represents the weighted average modified duration of the portion of the portfolio invested in debt securities.
** Total principal and interest outstanding on the credit facility divided by the value of the portfolio.
November 30, 2023
Growth of $10k
$30,000 |
$25,000 |
$20,000 |
$15,000 |
$10,000 |
$5,000 |
11/30/1311/30/1411/30/1511/30/1611/30/1711/30/1811/30/1911/30/2011/30/2111/30/2211/30/23 | ||||
6/25/13 | ||||
NAV - $13,908 | Market - $11,937 | |||
Bloomberg U.S. Aggregate Bond Index - $11,661
Morningstar Developed Markets Index - $26,676
Past performance does not guarantee future results.
Important risks
An investor should consider investment objectives, risks, charges and expenses carefully before investing. To obtain an annual report or semi-annual report which contains this and other information visit www.principalcef.com or call 855.838.9485. Read them carefully before investing.
An investment in the Fund is not appropriate for all investors and is not intended to be a complete investment program. The Fund is designed as a long-term investment and not as a trading vehicle.
Investing in the Fund involves risks, including the risk that you may receive little or no return on your investment or that you may lose part or even all of your investment. Therefore, before investing you should carefully consider the risks that you assume when you invest in the Fund's common shares. Securities backed by commercial real estate assets are subject to securities market risks similar to those of direct ownership of commercial real estate loans including, but not limited to, declines in the value of real estate, declines in rental or occupancy rates and risks related to general and local economic conditions.
The Fund's investment objectives and policies are not designed to seek to return the initial investment to investors that purchase shares.
Investing in the Fund involves risks, including exposure to below-investment grade investments (i.e.,"junk bonds"). The Fund's net asset value will vary and its distribution rate may vary and both may be affected by numerous factors, including changes in the market spread over a specified benchmark, market interest rates and performance of the broader equity markets. Fluctuations in net asset value may be magnified as a result of the Fund's use of leverage. Shares of closed-end investment companies frequently trade at a discount from their net asset value and initial offering prices. The risks associated with this characteristic of closed-end investment companies may be greater for investors expecting to sell their shares in a relatively short period after completion of the initial public offering. For further discussion of these and additional risks associated with an investment in the Fund see the Prospectus.
The Fund is a closed-end fund and does not continuously issue shares for sale as open- end mutual funds do. The Fund trades in the secondary market. Investors wishing to buy or sell shares need to place orders through an intermediary or broker. The share price of a closed-end fund is based on the market's value.
Diversification does not eliminate the risk of experiencing investment losses. Bloomberg US Aggregate Bond Index: a broad-based benchmark that measures the investment grade, US dollar-denominated,fixed-rate taxable bond market. The index includes Treasuries, government-related and corporate securities, fixed-rate agency MBS, ABS and CMBS (agency and non-agency).
Morningstar Developed Markets Index GR measures the performance of companies in developed markets ex-North America. It covers approximately 97% of the full market capitalization in the Developed Markets ex-North America.
Basis Point - One hundredth of a percentage point (0.01%). ALPS Advisors, Inc. is the investment adviser to the Fund.
Principal Real Estate is a trade name of Principal Real Estate Investors, LLC, an affiliate of Principal Global Investors and is the investment sub-adviser to the Fund. Principal Real Estate Investors, LLC is not affiliated with ALPS Advisors, Inc. or any of its affiliates. Principal Asset ManagementSM is a trade name of Principal Global Investors, LLC. Principal®, Principal Financial Group®, Principal Asset Management, and Principal and the logomark design are registered trademarks and service marks of Principal Financial Services, Inc., a Principal Financial Group company, in various countries around the world and may be used only with the permission of Principal Financial Services, Inc.
Secondary market support provided to the Fund by ALPS Fund Services, Inc.'s affiliate. ALPS Portfolio Solutions Distributor, Inc.
ALPS Portfolio Solutions Distributor, Inc. is a FINRA member.
PRE000397 | EX 2/15/2024 |
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Principal Real Estate Income Fund published this content on 30 December 2023 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 30 December 2023 06:08:44 UTC.
