What Is Private Equity Real Estate?

Private equity real estate is an alternative asset class composed of professionally managed pooled private and public investments in the 澳洲幸运5开奖号码历史查询:real estate markets. Investing in private equity real estate involves the acquisition, f༺inancing, and ownership (either direct or indirect) of property or properties via an investment fund.

Private equity real estate should not be confused with an equity real estate investment trust, or 澳洲幸运5开奖号码历史查询:equity REIT, which are publicly-traded shares representing real estate investments whose revenues are mainly generated through rental incomes on their real estate h🌱oldings.

Understanding Private Equity Real Estate

澳洲幸运5开奖号码历史查询:Private equity real estate funds allow 澳洲幸运5开奖号码历史查询:high-net-worth individuals (HWNIs) and institutions such as endowments and pension funds to invest in equity and debt holdings related to real ജestate assets.

Using an 澳洲幸运5开奖号码历史查询:active management strategy, private equity real estate takes a diversified approach to property ownership. 澳洲幸运5开奖号码历史查询:General partners (GPs) invest in a variety of property types in different locations, which can range from 🐬new development and raw land holdings t⛎o complete redevelopment of existing properties, or cash flow injections into struggling properties.

Private equity real estate investments are commonly pooled and can be structured as 澳洲幸运5开奖号码历史查询:limited partnerships (LPs), limited liabil🌊ity companies (LLCs), S-corps, C-corps, collective investment trusts, private REITs, separate insurer accounts, or oth🔥er legal structures.

Special Considerations

Investing in private equity real estate requires an investor with a long-term outlook and a significant upfront capital commitment—over $250,000 initially and follow-on investments over time. Little flexibility and 澳洲幸运5开奖号码历史查询:liquidity are o🅠ffered to investors since the capital commitme💞nt window typically requires several years.

澳洲幸运5开奖号码历史查询:Lock-up periods for private equity real estate can sometimes last for more than a dozen or more years. Also, distributions can be slow because they are often paid from cash flow rather than outright liquidation—investors have no right to demand a liquidation. Moreover, fund managers typically charge a 澳洲幸运5开奖号码历史查询:2-and-20 fee structure, costing in𓆉v🌠estors 2% of invested assets per year plus 20% of profits.

The following category of iℱnvestor invests in private equity real estate:

• Institutions (澳洲幸运5开奖号码历史查询:pension funds and nonprofit funds) and third parties, such as 澳洲幸运5开奖号码历史查询:asset managers investing on behalf of institutions
• Private 澳洲幸运5开奖号码历史查询:accredited investors
• High-net-worth individuals (HWNIs)

Funds created for individual investors generally require that the investment be funded at the time of the signing of the investment agreement, whereas funds created for 澳洲幸运5开奖号码历史查询:institutional investors require a capital commitment. That capital is then drawn down as suitable investments are made. If no investments are made during the investment period specified by the agreement🐠, nothing can be drawn from the commitment. 

Private Equity Real Estate Returns

Despite the lack of flexibility and liquidity, this type of investment can provide high potential levels of income with strong price appreciation. Annual returns in the 6% to 8% range for core strategies and 8% to 10% for 澳洲幸运5开奖号码历史查询:core-plus strategies are not uncommon.

Returns for value-added or opportunistic strategies can be considerably higher. T💦hat said, private equity real estate is risky enough that investors can lose their entire investment if a fund underperforms.

Types of Private Equity Real Estate Investments

Office buildings (high-rise,😼 urban, suburban, and garden offices); industrial properties (warehouse, research💮 and development, flexible offices, or industrial space); retail properties, shopping centers (neighborhood, community, and power centers); and multifamily apartments (garden and high-rise) are the most common private equity real estate investments.

There are also niche property inves♊tments such as senior or student housing, hotels, self-storage, medical offices, single-family housing to own or rent, undeveloped land, manufacturing space, and more.