Why Private Equity Loves Real Estate

Everyone wants to know where private equity is in the current real estate cycle. That's why we're holding a special premium event on the topic this Tuesday featuring top investors and developers at the St. Regis. Here's a look at some of the issues they'll be addressing.

One of our panelists, Goldstar Group CEO Michael Brodsky (snapped this morning), tells us private capital interest remains very high in commercial real estate, and it comes down to yield: T-bills, as well as corporate and municipal bonds can't compete with the returns real estate is delivering. He alsopoints out that low interest rates should keep both private investment advisers and high-net-worth individuals buying up properties.

Investorslike this property though it makes for one angry wolf (and three happy pigs). Michael says private equity isn't afraid to take chances with real estate, either. "Individual investors looking to take risk can get handsomely rewarded." And he should know: last summer, Goldstar, partnering with private capital, purchased Barracks West (above), a broken condo project in Charlottesville the firm is renovating that Michael says could generate unleveraged returns as high as 8% to 9%.

Not every asset class is golden though, Michael says: "Suburban office is difficult to underwrite, unless it's core A-plus." Slow leasing demand locally intensifies that trend. So, at least in the DC region, private capital's been chasing alternative opportunities like adaptive re-use and distressed properties. But ultimately,multifamily is king. As long as interest rates remain low and Fannie and Freddie support the business, since lofty demand for apartments figures to keep growing, it's the lowest risk for the private gang. Sign up here to see Michael and other experts next Tuesday at the St. Regis.