- October 1, 2018: Vol. 10, Number 9

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A glimpse into the afterlife: An investigation into private real estate fund legal term, extensions and liquidation

by Ira Shaw, Halle Marra and Dr Jacob Sagi

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

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