Real estate secondary transactions declined during Covid, why?
I get that some funds just didn’t want to invest during those unclear times. But since you’re providing liquidity to other LPs I imagine that during these times many LPs will want out in some existing funds creating plentiful opportunities to buyout existing LP equity. Is it just general fear that reduced deal flow? Also considering this is a relatively new and niche space.
I would venture a guess that difficulty in valuation probably caused the decline. If you are unsure of the rent roll, really difficult to agree on valuations (which is always the big issue of secondary transactions). This is same reason overall asset sales volume fell so much, sellers didn't want to discount and buyers felt unsure of price given risks.
That makes sense, then the only transactions available were the LPs that absolutely needed liquidity. Reducing transaction volume across the board
Given how fast stock prices recovered, and how liquid the bond markets stayed (thank you Fed), I can't imagine too many LPs had any major need for liquidity. If they did, plenty of liquid assets to trade first before taking hair cuts on the illiquid ones.
In a scenario where there is an extended downturn. Do you see secondary transaction volume going up?
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