Creative destruction works well for people with a fund. The forces that allow a business to thrive off change are capital and talent and, at least in theory, a fund should be the purest repository of these resources.
This, the October issue of Private Equity Real Estate, presents evidence that the ever evolving market for real estate investment is best exploited by funds managed by highly incented partners. Take, for example, Jonn Elledge's survey of the new opportunities in Japan. A market that has been in the real estate doldrums for nearly 15 years is beginning to show signs of life. Add to that the emergence of J-REITs as buyers of quality properties, and a new kind of investment strategy presents itself to savvy market players. Now healthy real estate exists within unhealthy companies, and the shortest route between a corporate umbrella and a J-REIT is shaping up to be a real estate opportunity fund.
Fund managers (should) have the ability to be flexible within a given strategy. Paul Fruchbom explores the increasing practice of fund managers investing alongside each other in “club deals,” an approach favored by private equity mega-funds. And Aaron Lovell looks at the instances when LP money is invited into the acquisition equity pool. So long as interests are aligned and all parties can act quickly, these practices will likely shape the future of real estate deal-making.
Not all creative change involves destruction, however, as you will see in next month's issue of PERE, which will be bigger, better and an improvement on the current PERE format in all ways. In response to the pleasing reception we have had to the launch of this publication, we have decided to expand our coverage of the private equity real estate market and do so in a format more similar to our sister magazine, Private Equity International.
This expansion will mean a greater focus on features, more colorful portrayals of people, a more exhaustive look at investing around the world, and some new sections we're sure you'll enjoy. A preview: The Four Food Groups, Nuts & Bolts, Deconstructed. To say more would be indiscreet.
Enjoy this issue and expect more of the next,