Private Equity in Real Estate: An Emerging New Market

The Wall Street Journal reported recently about an emerging new secondary market for real estate funds. Despite the relative stability of the real estate industry, many financial advisors say that the 2008 global economic crisis left a comparatively deep scar in the market - particularly in the area of private equity and real-estate funding. Nevertheless, trends see the real estate market rebounding, with more corporations partnering with private equity funds. There are several advantages to this.

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 For one, private equity is usually made from partnerships that are thoroughly assessed beforehand. Unlike in the general market, in private equity funding, both companies know each other. Most selling and purchasing are made after weeks, if not, months, of meetings. As one can imagine, it can be considered a tedious process, but real estate property managers have found that these partnerships last longer and are less likely to fail. The amount is normally quite large, and both companies cautiously list every single detail in their contract. Though lengthy, partnerships are stronger as both parties understand what is involved and what is at stake.

These partnerships are also carefully handled by a real estate investment and management group such as Pacer Partners. Historically, private equity funding was done only with the mediation of each group’s financial advisors. However, it was seen that having a separate "eye," as it were, contributed to a fairer and more stable contract. It must be emphasized that while these services initially seem like an unnecessary cost, the long-term benefits of such an association potentially saves millions of dollars.

 Image source: cliffordchance.com

Jon Bourbeau is the driving force behind Pacer Partners, which deals with private equity funding for different levels of real estate assets. For more information, visit this LinkedIn page.