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Private Equity Real Estate – 9 Risks to Consider Before Investing

Like all investments, there is a distinct risk/reward tradeoff with private equity real estate.  The higher the risk, the higher the potential reward (or loss).  The best investors have a knack for recognizing the risks in each transaction and take proactive steps to mitigate them as part of their project plan. As a private equity firm [...]

FNRP’s COVID-19 Acquisition Strategy

A few weeks ago, our firm was faced with an incredibly difficult situation. We were under contract to purchase a tremendous, dominant shopping center anchored by national tenants in a strong secondary market. We were full steam ahead and proceeding to the closing table. Our third party reports were completed and our financial due diligence was finished. [...]

Real Estate Returns:  Cap Rate vs. Return on Cost

Every real estate investor has their own set of return requirements that help determine whether or not a project is worth pursuing.  To measure potential returns, there are two widely used methods:  Capitalization (or “cap”) Rate and Return on Cost.  They each have their own strengths and weaknesses and both are useful in the appropriate situations. [...]

Evaluating Risk:  Four Types of Commercial Real Estate Investments

Diversification is a foundational principle of nearly all risk management programs.  One way to diversify a real estate investment portfolio is to deploy capital into assets at multiple points on the risk/return spectrum to protect it from extreme changes in the value of any one asset.  It is a time tested strategy that can be applied [...]

Understanding the Capital Stack

Depending on the size of the transaction, the finances of a real estate deal can be a complicated matter.  In the largest deals, funds can come from a variety of sources/investors, each of whom have their own specifications, rules, and requirements.   Collectively, these sources are known as the “Capital Stack” and each component plays an important [...]

Waterfalls, Clawbacks & Catch-Up Clauses – Three Private Equity Terms Explained

Whether allocating money to an investment fund or to an individual deal, the terms and conditions of a private equity real estate investment are governed by a document called the “Private Placement Memorandum” or “PPM” for short.  Among other things, the PPM lays out two important aspects of the transaction: (1) the fee paid to the [...]

The Benefits of Private Commercial Real Estate Investment

No matter the asset class, one of the bedrock principles of investing is that diversification is key ingredient in the recipe for a well balanced portfolio. Historically, conventional wisdom has suggested that a “basket” of stocks and bonds contains all the diversification necessary for a well balanced portfolio. While this is true, there’s another asset class [...]

Why Passive Investors Prefer Private Equity CRE Partnerships

Often, casual conversation can make it seem like owning and operating rental properties is a risk free, passive endeavor. In reality, an individual owner managing one or more rental properties may find that the required level of effort is far from passive and that the returns are sub-optimal when accounting for time invested. For many, this [...]

Preserving & Protecting Wealth Using Private CRE Partnerships

In July of 2019, the current economic expansion officially became the longest in United States History1. It began in June of 2009 and, for the last decade, investors of all types have benefited from a truly historic ,economic expansion. Opinions vary widely on when or how it’ll come to an end, but precedent tells us two [...]

The Case For Private Equity Commercial Real Estate Partnerships

If you’ve decided that you’d like to make a commercial real estate investment, two logical questions likely follow: what type of property are you going to invest in and what type of investment are you going to make? Regarding property type, there are four broad commercial real estate asset classes: retail, industrial, office, and multifamily. Each [...]

Benefits of a Middle-Market CRE Investment Strategy

To maximize the odds of delivering above average returns, commercial real estate property investors and managers tend to develop expertise in a specific market segment. This expertise, combined with the experience gained through multiple transaction cycles can create a competitive advantage that becomes an asset for investors and partners. When choosing which segment to develop expertise in, [...]

Debunking the Commercial Real Estate Liquidity Myth

There’s a popular saying in investment circles that “cash is king.” For many, this means that an investment’s liquidity is of paramount importance, and it may be. Conversely, it also implies that lack of liquidity is a bad thing, but we choose to look at it a bit differently. It’s common for commercial real estate deals [...]

How to Invest in Shopping Centers Through a Private Equity Real Estate Firm

Buying a retail shopping center has the potential to be a very profitable transaction.  If done correctly, it can deliver a stable stream of rental income and steady capital appreciation resulting in a substantial return for the owner upon exit.  However, buying a shopping center isn’t nearly as easy as picking up a few things at [...]

Risk Managment in Commercial Real Estate

Risk management in commercial real estate investing exists on a spectrum. On one end, the safest investments have the highest prices and offer the lowest returns. For example, a single tenant property leased to a national tenant may return ~5% annually, but may sell for a premium because of its relative safety. On the other end [...]

Commercial Real Estate Opportunity Zones: An Investment Primer

Cities are exciting, vibrant places.  They’re teeming with energy and, while it’s not noticeable on a day to day basis, constantly in a state of change.  In some cases, change can be a powerful force that improves the lives of many. In others, it has the potential to leave a city’s most vulnerable residents and communities [...]

Upgrading from Investing in Residential Real Estate to Commercial Real Estate

Navigating the Transition from Residential to Commercial Real Estate Investment Individuals making a first time real estate investment often begin with a residential rental property acquisition to jump start their investing career. Purchasing a condominium, single-family home, or duplex can be a good introduction to earning rental income and experiencing the responsibilities associated with managing a [...]

Risk vs. Return: The Types of Commercial Real Estate Investments

Within the landscape of commercial real estate investment, an investor must make a myriad of decisions about where to deploy their capital. From asset class to market, project type, and capital structure, each decision is a plot point on the risk vs. return spectrum. For every choice that adds more risk to the equation, a higher [...]

Benefits of Investing in Private Commercial Real Estate

Smart investors are looking for ways to make their money work for them, which is why private commercial real estate is often part of the investment strategy. If you are looking for new investment opportunities, then it can be helpful to learn about these benefits to identify the best place to put your money. What is [...]

Use Private Equity Commercial Real Estate to Diversify Your Portfolio

Diversity is everything when it comes to a strong investment strategy. Some investors can’t relax because they are worried about the stock market volatility. Even though the stock market might be high right now, it’s hard to predict the downswings that might happen in the future. Whether you’ve invested in the stock market, bonds, or other [...]

How to Self-Direct a Roth IRA to Invest in Commercial Real Estate

Did you know that retirement savings in a Roth IRA aren’t limited to investments in stocks and bonds? In the past, it has been common for investors to use traditional investment assets for these accounts. But new opportunities are growing in popularity and could lead to higher gains in the future, such as self-directed Roth commercial [...]