Opportunistic REPE funds vs PE returns

Most RE Opps funds take fund level carry (yes maybe its deal by deal, but to clear the hurdle/not get clawed back its on the fund level).

Huge firms like Blackstone/Carlyle/Starwood/OAK etc., they don't manage their real estate assets directly and usually partner with an operator who needs to put in a portion of the equity and also earns a carry. BX/etc. are LPs on a deal level but GPs on a fund level. So for example:

• Buyout of a apartment building for 100m, 67% debt 33% equity.
• Out of equity 30m from Blackstone fund, 3m from operator, operator has 20% carry (assume no hurdle for simplification).
• 5 years go by, proceeds from sale of the building net of debt of 66m - 2x all equity.
• 6m to operator out of their equity contribution.
• 60m to blackstone equity contribution BUT they need to pay a carry to the operator. So out of blackstones equity, 20% of the gain (30m) - 6m to operator, and only 54m to Blackstone.
• Operator gets 12m from their initial 3m investment (4x money).
• Blackstone fund gets 54m out of their 30m investment (1.8x gross). Then Blackstone dips their hand in on the 24m gain to their LPs and also take a 20% carry, so the 33m gain ends up being:
• Operator - Profits 9m (Deal level carry + return on investment)
• Blackstone fund - Profits 19.2m
• Blackstone - Profits 4.8m (Fund level carry)

There are a small subset of re opps funds raised by these operators to put up the equity portion of their deals, usually when they are starting off. Those funds can have insane economics because of the deal level carry (which is proportionally paid to LPs of the operator fund). Decent amount of risk investing in those operator funds, though usually because they are new platforms that aren't capitalized to be able to put in up operator equity.