Open-end core real estate funds have been up and down more times than Donald Trump’s finances. But like Trump, they are back on top, thanks to investors’ strong appetite for high-quality income-producing assets.
From the Current Issue
When the 2008 global financial crisis hit with magnum force, ground-up retail development dropped into a seemingly bottomless pit.
Folksy images of the family farm are strongly ingrained in the American imagination. It is a romantic legacy from an earlier time when 90 percent of the population made its living as farmers and collectively built the backbone of what became a great nation — and the world’s most productive food producer.
During the past 18 months, private equity real estate GPs in Latin America appear to have missed the mark in the identification and pursuit of opportunities throughout the region. During roadshows and public forums, GPs repeatedly called attention to numerous real estate trends that failed to materialize and grossly underestimated the role of local capital in meeting financing demand.
I listened to The Dohrmann Report podcast for July and heard Geoffrey Dohrmann make several interesting comments, but I want to focus on the ones he made regarding the indisputable consolidation in the investment management industry. Geoff quoted some fairly startling statistics, one of which was that the top 10 firms in terms of assets under management account for 53 percent of all investable institutional real estate assets. The top 25 firms account for 76 percent of total assets. He also mentioned that the number of firms sponsoring Institutional Real Estate, Inc. publications shrank from 48 to 13 between 1990 and 2000 because of consolidation.
In today’s volatile investment markets, the window of opportunity to gain outsized returns in a particular property type or market can be brief. For that reason, investing in U.S. and international real estate requires a flexible investment approach and fast, thoughtful decision making.
Median pre-tax operating margins rose to 32 percent, the highest since 2007, according to a new survey of 101 money managers worldwide who invest an aggregate $23 trillion for institutions and individuals. The new high in profit margin was driven by market appreciation, which also lifted 2012 revenue in the global asset management industry past the previous 2007 peak.
Within the business world today, there are tremendous demands to share and transmit data between multiple organizations. This demand requires distribution of accurate and relevant information in a timely manner. In addition, as technology continues to evolve, more tools and firms are attempting to analyze this data and turn it into pertinent information. That increases the need even more for smooth data flows. Within the commercial real estate investment industry, this demand is no different and continues to grow at a rapid pace.
While the second quarter fundraising volume was not earth shattering, the number of funds that contributed to the total was noteworthy. During the period, 31 private equity real estate funds wrapped up their marketing efforts, raising a total of $14.9 billion, according to Institutional Real Estate FundTracker. It was the largest number of fund closings recorded since third quarter 2008 when 39 funds were finalized. The $14.9 billion sum represents a substantial increase from the first quarter figure of $7.9 billion and the second quarter 2012 total of $9.5 billion.
Home is where the heart is — and, perhaps, a mother lode of profits for institutional investors who have banked on the single-family housing sector. They have to be feeling pretty good about their strategy after receiving a spate of positive housing reports. Among the numbers provoking exuberance:
Fiscal 2013 proved a good year for U.S. state and local government plan funds, as their collective investments recorded a 12.4 percent gain, while their real estate investments returned 9.8 percent.
U.S. equity REITs trailed the broader equity index in July, as the NAREIT All Equity REIT Index returned 0.83 percent — considerably lower than the S&P 500 Index’s 5.09 percent return for the period.
Build it and they will come.
Ugh. Haven’t we heard more than enough of that cliché? Probably, but there are topics and times where it is applicable. Speculative development in 2013 might be the right tandem.