Real estate managers are tweaking their models, turning to joint ventures and other arrangements with asset owners and operators to generate capital and deal flow.
No longer are investors happy committing capital blindly to commingled funds that come with hefty fees. Instead, they want more control, and some say on the type of portfolio, to gain access to a specific sector or region or type of property.
Real estate money managers have gotten the message, and are changing their business models to meet this new demand, switching to more creative mixtures of how they make investments.
Funds-of-funds managers have become especially fond of joint ventures that include institutional investors and sometimes also operating partners to invest in buildings or portfolios. Real estate managers are investing in assets and limited partnership interests on the secondary market to focus on investing jointly with new and existing investors and operating partners on a deal-by-deal basis.
CBRE Global Investors' funds-of-funds business model changed so much that it altered the fund-of-funds' group name earlier this year.
It's not only funds-of-funds managers that are modifying the way they do business. Many of the largest real estate managers — including Blackstone Group and TIAA-CREF — are hooking up with real estate investment trusts and other so-called operators that manage the properties, find tenants and oversee property improvements, for proprietary deal flow and operational expertise. At New York-based TIAA-CREF, joint ventures with major global investors on trophy U.S. properties were a major source of its asset growth in the year ended June 30.