REITs - Typical deal structure

Folks in REITs, can you please answer if REITs have some sort of fees and promote structure set up like the PE folks? How do REITs typically structure their deals and allow themselves to get from deal-level teens IRR to the monstrosity returns REPE folks get?

16 Comments
 

Not really fair to compare mega PE and VC to real estate due to the relatively small deal size of real estate. A 1bn middle market PE fund targets 30%+ IRR where as even the most opportunistic RE funds are targeting the low 20s

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Best Response

Generally speaking, REITs have a fee structure whereas a REPE/opportunistic fund would have more of a promote/participatory structure, for obvious reasons. I've stated on other threads but there can be exceptions to the rule. This is generally due to the types of deals that each acquire and also a function of the usual investor profile. The thing I think is laughable is that wannabe hardos in college on this forum start spamming links about REITs outperforming other fund profiles when you can't compare them. REITs/core funds basically buy and hold something forever as long as it's spitting out relatively good annual yields relative to bond rates whereas the structure of value-add/opportunistic funds generally have a lifespan of 5-10 years. So of course depending on the vintage of those funds they could have vastly superior/inferior returns to REITs which are more steady state. Right now for example, people are seeing lots of funds with acquisition vintage in '06-'07 and wondering why the returns are poor. The people that say this have no concept of how the industry (and broader capital market) works.

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