Your real estate qualifications may just have become more valuable – The Property Chronicle
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Your real estate qualifications may just have become more valuable

The Professor

Private real estate partnerships tend to outperform institutional real estate investments by a significant margin for several reasons. First, they include a greater proportion of higher risk investments and value-add opportunities while institutional investors mostly buy seasoned and highly occupied properties with less upside. Second, the private investors use more leverage while institutional investors often use none.

Third, they consider smaller properties including those well below US$10m while institutional investors like to play in the large markets with big ticket minimums, and the required yields for the smaller investments are higher while institutional investors will accept single digit returns. Direct investments have some risk associated with the lack of liquidity, but this is true independently of scale, unless you select REITs, which up until now have been the best choice for smaller investors.

Last, private partnerships have aligned incentives with general partners providing some skin in the game, while institutional investment decisions are dominated by those who need to first execute on allocated capital and receive more compensation as a percentage of assets and less as promotes and shared returns.

It is great for the young aspiring investor who has perhaps $50,000 to invest and would like to be part of a diversified and higher-yielding fund

What does this have to do with designations?

The Professor

About Norman Miller

Norman Miller

Norm Miller is the Ernest Hahn Chair and Professor of Real Estate Finance at Burnham-Moores Center for Real Estate, University of San Diego, School of Business.

Articles by Norman Miller

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