The Acquisitions team pursues and analyzes deals, negotiates them, set up the financing, and convinces the decision-makers at the firm to invest in properties. Others separate them at some levels of the hierarchy but combine them elsewhere. They’re separate teams at some firms, while others combine them. Within real estate private equity, there are two distinct roles: Acquisitions and Asset Management. Regulations – REPE firms, as private investment firms, are lightly regulated and not subject to the same requirements as REITs or even REOCs.Holding Period – REPE firms plan to acquire or develop properties, hold them for a few years, and then sell them REITs and REOCs often hold properties indefinitely.REIT and REOC investors are public shareholders and lenders, and their investments are highly liquid. Investors – REPE investors are the Limited Partners whose capital is locked up for a long period as the firm invests.Real estate private equity firms differ in the following ways: Real estate operating companies (REOCs) are similar, but they do not face the same restrictions and requirements and do not receive the same tax benefits. In exchange for that, they receive favorable tax treatment, such as no corporate income taxes in many countries. REITs must comply with strict requirements about the percentage of real estate-related assets they own, the percentage of net income they distribute in the form of dividends, and the percentage of their revenue that comes from real estate sources. Real estate investment trusts (REITs) raise debt and equity continuously in the public markets and then acquire, develop, operate, and sell properties. If they do operate in residential real estate, the strategy is usually to buy, hold, and rent out homes to individuals (see: Blackstone).įor more, see our private equity overview. REPE firms usually focus on commercial real estate – offices, industrial, retail, multifamily, and specialized properties like hotels – rather than residential real estate. The outside investors or Limited Partners might include pension funds, endowments, insurance firms, family offices, funds of funds, and high-net-worth individuals. Real Estate Private Equity Definition: Real estate private equity (REPE) firms raise capital from outside investors, called Limited Partners (LPs), and then use this capital to acquire and develop properties, operate and improve them, and then sell them to realize a return on their investment. Real estate private equity offers some advantages over the traditional “high finance” paths of generalist investment banking and private equity.īut it’s not for everyone, and you must read the fine print closely before buying into this career: What is Real Estate Private Equity? The real estate industry varies tremendously based on the firm, location, and strategy – and the differences in compensation, hours, and work styles reflect that. After investment banking and private equity, real estate private equity (REPE) generates the most career-related questions for us.
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