Is the allocator approach to equity placement at the property level becoming obsolete? With the institutionalization of third party/asset management, it seems like a large real estate fund could easily buy direct and not have to promote/dilute their returns while still retaining a similar level of risk.
Anybody work in the fundraising side of things - are investors catching on?
I think many investors (institutional and HNW and others) want investments in real estate but realize the risks in single asset deals, or even single operator funds. That is the whole appeal of investing with multi-manager allocator funds and REPE and similar ventures. Diversification for low-cost (fee compression is a big part of this story).
It also benefits on asset management side via the leverage and operational synergy of a fund/platform. Simple example, what is going to be costlier in all ways, maintaining a capital reserve for one property or a portfolio? Clearly with a property you can spread the reserve and better use lines of credit and other cash management methods to deal with CAPEX. At a single asset level, a lot more money would have to be held to manage the risk.
Too many single asset investment deals 'blew up' after 08, large funds only had degregated performance at most (not universally true, but you get the point). TICs were popular back then, now everyone knows what an epic disaster those are when stuff goes bad (try getting 100 signatures and 100 people to contribute capital!!).
Put simply, who wants a greater risk of capital calls? Those are almost always the potential, even in good deals, with single asset deals. Funds/portfolios and other diversified assets are often viewed as much better deal on a risk-adjusted basis. Especially if you have limited funds for a real estate allocation.
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