A glimpse into the afterlife: An investigation into private real estate fund legal term, extensions and liquidation
Private equity real estate investors have the option of investing in the asset class through two common structures: open-end “evergreen” funds and closed-end, fixed-life funds. Open-end core funds typically offer some form of a quarterly redemption to satisfy liquidity requests, either with capital from new investors or asset sales. The timeliness of redemptions from open-end funds can vary as investor liquidity needs shift. Depending on the severity of liquidity needs, investors can wait in the queue for a quarterly redemption or seek liquidity in the secondary market.
Closed-end funds, on the other hand, do not typically provide a redemption option to investors. Rather than the “buy and hold” approach employed by core funds, these funds usually seek to improve a property, with much of the return generated by value appreciation, according to Nareit. Such funds have a fixed term, with an expiration date that serves as a liquidation target. It is not unusual for a clos