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Private Equity Real Estate Secondary Market: All Talk and No Action?

by Stuart Taylor

  • 01 Jul 2009
  • RE

In recent months there has been a fairly dramatic increase in the number of real estate investors expressing clear interest in selling private equity real estate fund stakes on the secondary market. With the number of interested buyers outweighing that of sellers, the potential for deals is significant. However, activity levels are some way behind interest levels, and this can be attributed to three main factors:

 

• Uncertainty: with December 2008 valuations only just coming through, potential buyers and sellers are still uncertain as to whether the large discounts on historic NAVs will represent good value relative to NAVs later in 2009;

• Discounts: the high level of discounts has deterred all but the most forced of sellers from the secondary market. Investors wishing to rebalance their private equity real estate portfolios may find the current prices prohibitively low, and are unwilling to crystallize a loss;

• Opaqueness: sellers and buyers alike have limited reliable information to help them make strategic decisions, and may be unwilling to initiate discussions without more information on likely values.

 

The overall feeling in the private equity real estate market is that secondary volumes will expand significantly at some point, but that these factors are currently frustrating the potential growth.

 

For the full report on private equity real estate secondary market, please see Real Estate Spotlight July 2009. Click here to register to receive Real Estate Spotlight free each month.

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