- April 2010: Vol. 22 No. 4

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Just Capital: The Recapitalization of Global Real Estate Shows a Marked Difference Between the Listed and Private Equity Sectors

by Jacques Gordon

The global recession ended in 2009, but echoes of the financial crisis persist. To mix metaphors, the credit bubble has a very long tail. In private equity real estate, for example, deleveraging is going to take time. In the listed sector, the deleveraging process was brutal and fast. Not every company survived. Those that did survive had to sell stock at highly dilutive levels to pay down debt. In private equity terms, these secondary offerings were the equivalent of a series of abrupt write-downs to levels low enough to attract capital and allow re-equitization to occur. A similar process — with a considerable lag — will play out in private equity in the years ahead.

Yet the dynamics for private equity repricing and deleveraging will be different. Private equity balance sheets will be repaired at a time of improved credit spreads and modest optimism in the outlook for the real economy (relative to one year ago). In many countries, a significant increase in private equit

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