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Real Estate Private Equity Fund - Quarterly Review


Fourth Quarter, 2013

CohnReznick Presents Its Thoughts and Insights for the Real Estate Private Equity Fund Industry
Welcome to CohnReznick’s second edition of “Real Estate Private Equity Fund – Quarterly Review” – a high-level snapshot of the current state of the real estate private equity fund industry. Each CohnReznick edition contains insight and thoughts on a broad array of compelling issues, challenges, and opportunities that most private equity funds are facing in today’s uncertain economic, regulatory, and political climate. We trust that you will find that the challenges and potential opportunities presented here will be useful to the decisions facing your business today.

Capital Investment in Real Estate Private Equity Funds: The Money is Here – and There
Investors continued to pour cash into real estate private equity funds in the third quarter of 2013, with some $19 billion raised, making this the strongest third quarter for fundraising since the onset of the Great Recession.
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Current M&A Activity, Valuations, and Key Transactions
Despite last September’s momentary lull due to concerns over the government shutdown and possible interest rate hikes, prices continued to rise for commercial real estate properties, especially multifamily, throughout the first three quarters of 2013. Going forward, price increases are expected to continue throughout 2014.
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Fundraising and Investor Relations
A significant number of funds continue to compete with each other for investor dollars, with the largest funds with proven track records continuing to enjoy a decided advantage in getting investors’ attention. Institutional investors are much less willing to invest in a first-time fund, favoring well-known names with proven track records instead.
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Private Equity Looks for Real Estate Opportunity
With investors seeking higher yields that more closely track increased property prices, their attention is gradually shifting toward more opportunistic strategies through higher yielding real estate investments in secondary markets, secondary property types, or new development such as land or challenged properties in need of repurposing.
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Sectors Strengthen
Demographics and record-low interest rates are continuing to fuel recovery across most property sectors. With continued job growth, steadily improving property fundamentals and sustained economic improvement, 2014 could shape up to be a profitable and memorable year for commercial real estate.
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Federal Oversight and Regulatory News
There is no question that from a regulatory perspective, real estate private equity funds will be facing a flood of new challenges due to such laws as Dodd-Frank here in the U.S. and the second stage of the Alternative Investment Fund Managers Directive in Europe, along with Basel 3 and the Volker rule. In addition, the constant threat of the carried interest legislation would have a considerable impact on how funds are structured and operate.
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About CohnReznick's Commercial Real Estate Industry Practice
CohnReznick’s commercial real estate professionals bring extensive, real-world experience and specialized industry knowledge to each and every client engagement. As acknowledged thought leaders who understand the broadest range of accounting, tax, and business issues across every sector of the industry, we provide institutional clients with an array of services ranging from audit, assurance, and tax compliance to transaction structuring, valuations and appraisals, due diligence, regulatory compliance, and mergers and acquisitions advisory. Our clients include private equity funds, pension funds, land developers, home builders, and hotel and resort owners and operators. For more information, please visit www.cohnreznick.com/commercialrealestate.

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