Real-estate investments are considered to be a great asset-class, impeccable for long-term investments and consistent wealth creation.
Investments in real estate are influenced by distinct factors like emotions of holding the property, passion for developing commercial or residential infrastructure, productive opportunities of passive income generation in the form of rental income, systemic approach for wealth creation, etc.
For institutions and individuals considering private equity real estate investments, numerous structures are available for capital deployment. Right from direct purchase and management of the property to investing the real estate-oriented mutual funds or picking the other elite sources of real-estate investment options.
What is Private Equity in Real Estate?
Investors who are keen on the benefits of real estate ownership without the time and effort commitment to managing the real estate, could look at private equity real-estate partnership as an effective solution.
Private equity real estate is about investments from a broad spectrum of investors – be it High Net Worth Individuals (HNWI), Institutional Investors, Family Offices and / or retail investors who have a significant amount of capital to deploy.
The rudimentary structure of private equity real estate investments is about commercial real-estate firms identifying a property for development or re-development etc and creating a special purpose vehicle kind of investment to deal with a specific project.
To fund the project, the firm contributes part of the project requirements from its internal source, and sources the remaining from potential investors, with rewarding returns for wealth creation.
Due to the SEC limits on who can gain access to private equity real estate investments, the number of entrants is limited or restricted. Thus, technically the opportunity is wide, and any strategic investments into private equity real estate could lead to significant returns.
Returns Of Private Equity Real Estate
The historic performance of private equity real estate as an asset class elucidates the success stories of private equity real estate investments. However, the emphasis is on focusing on deriving optimal returns from private equity real estate investments.
Firstly, in the case of traditional real estate investment companies, the costs for managing the project developments or redevelopments are high, and thus, the net returns for the private equity real estate investors could be comparatively low.
The rationale for comparatively lower returns is the expenditure on the vendors, suppliers, construction costs, consultants’ fees, etc. A private equity real estate company that does not directly engage in the project would entail higher operational costs.
Vertical Integration and Its Benefits
On the other hand, a real estate company having vertical integration could very easily leverage internal resources and capabilities for handling one or more areas of the asset including greenfield construction, rehabilitation and property management along with financial asset management as an added deep seated capability.
Consequently, the aggregate costs of acquiring, running, managing a project scales down proportionately, which improves the topline as well as bottom line of the project. It is a massive boost in a private equity real estate company’s efficiencies which results in better returns for its investors.
Also, a vertically integrated real estate firm has the wherewithal to deal with maintenance, upkeep and refurbishments the assets and properties which enhances the monetary value of the real estate property itself.
At 33 Holdings, investors get to leverage our deep seated experience of the real estate markets, especially Georgia Real Estate.
With technology aided decision making from property evaluation, acquisition, development, rehabilitation and property management – 33 Holdings is uniquely placed to leverage the diverse capabilities in-house to identify, develop and enhance the value proposition of any real estate asset acquired.
Be it passive income, safeguarding existing wealth estate, leveraging opportunities for long term wealth generation with consistent, risk free returns to hedge against inflation – private equity real estate as an asset class is a safe haven for investors looking at a long term investment strategy.
As an instrument of investment, private equity real estate is second to none. If one is an asset manager for a family office, HNWI or institutions, it is of vital importance to be able to generate passive income and ensure there is diversity in the investment portfolio and asset class basket.
Engage with our investment relations team for an in-person discussion or email ir@33holdings.com for more.
