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Working Papers

Opportunistic Investing and Real Estate Private Equity Funds

Working paper #415
Dale Ann Reiss, Deborah Levinson and Sanford Presant

Opportunistic real estate private equity funds, also known as “value-added” funds and “opportunity” funds, are increasingly popular. This paper discusses the results of an Ernst & Young survey of 48 funds representing $72.3 billion of equity, raised in 145 separate funds, between 1988 and 2001. The survey revealed that a relatively small percentage of general partners control a large percentage of the capital. The majority of the larger fund general partners are real estate investing arms of larger private equity groups, whether the merchant banking arms of investment banks or stand-alone private equity firms. The sur-vey demonstrates current industry attitudes towards financial and performance reporting, tax issues, income allocations and distributions, and business transformation issues. General partners are facing increased pressure to standardize performance reporting, cre-ate greater transparency in financial reporting, and develop consistent valuation method-ologies for investments.

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