Next year, institutional investors will be bolstering their commitments to large, diversified private real estate investment strategies with more commitments to “complementary” niche strategies, predicted senior executives at placement advisory firm Eaton Partners.
Partners Michael Crawford and Carlos “Uli” Flores explained to PERE that after satisfying their requirements for generalist and wide-reaching property strategies, the likes of which are offered by firms including The Blackstone Group, Lone Star Funds and Starwood Capital, investors will likely favor strategies focused on sub-sectors like student housing, self-storage, data centers and specific geographic strategies in Asia.
Said Flores: “We are looking for complementary strategies that bring a certain element of diversification to the portfolio so it can be additive to the allocations to the Blackstones and Lone Stars and Starwoods.”
“Asset classes like student housing, self-storage and data centers sit on the sidelines of the largest asset groups within real estate,” he added.
Investors should expect net returns of around 15 percent from such strategies, and have a better chance of reaching 2x multiple, Flores added. “At the high end of value-added and the low end of opportunistic,” he said.
For its part, Eaton Partners expects to have two or three live real estate strategies on its books at any one time.
Crawford said: “We’re talking about working with specialists.” He added that such strategies could also include traditional real estate allocators in markets traditionally not considered as direct investment possibilities for large, institutions – where high net worth capital or local operators are the main buyers and sellers of assets. “We’re aiming to capture that dislocation,” he said adding that income-driven and credit strategies could also figure highly for investors looking for current returns without the J-curve.
Eaton Partners was acquired in November by Stifel Financial Corporation, New York-listed financial services firm. At the point of acquisition, the firm had more than 60 staff across six offices globally in Asia, Europe and the US.
It has raised more than $68 billion for 90 funds across asset types. Within real estate, the firm has worked with investment managers including GreenOak Real Estate, Baring Private Equity Asia and Landmark Partners.
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