Privately Traded Real Estate Equity

Abstract

Private commercial real estate equity held as an individual asset or in commingled vehicles represents one of the four real estate sectors for institutional investors. Within the sector are three primary strategies: core, value-added, and opportunistic. Core properties are well-positioned real estate properties with high occupancy rates and stable cash flows. Core properties are at the lower end of the risk and return spectrum where capital gain is secondary to income generation. At the opposite end of the spectrum are opportunistic properties, which are characterized by low or unreliable income streams but great potential for appreciation. Value-added properties have mixed characteristics, and lie between the two extremes of core and opportunistic properties. One significant problem for investors in the private equity sector is valuation.