Commercial Property Investment | Private Equity - The Real Deal

Private equity real estate groups, including Apollo Global Management and JPMorgan Chase, have struggled to raise funds since the downturn as institutional investors increasingly decide to strike out on their own property investments. According to the Wall Street Journal, the costly fees and underwhelming performance of many pooled funds have compelled large investors to build their own real estate investment divisions and acquire property directly.

Through direct investments, most often made in the form of providing equity to landlords, these investors cough up 50 percent less in fees, collect more of the profits and are able to have a say in property management decisions.

A poll by Preqin, which tracks alternative investments, found that 80 percent of 472 international investors with at least $10 billion in assets either invested, or planned to invest, directly in real estate.

Direct property investment by insurance companies and pensions was typical until the commercial property crash of the early 1990s. The sudden aversion to such investments led to the creation of more pooled funds. But, coming full circle, the increased reliance on debt combined with the continued collection of capital even without investment prospects during the years surrounding the most recent crash have brought institutions back to the table themselves. [WSJ]

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