According to WealthManagement.com, an increasing amount of investment managers are talking about putting together funds targeting opportunistic real estate investments. This is because of the cloudiness in the near-term outlook for commercial real estate performance due to rising interest rates and recessionary fears. But what are opportunistic real estate funds and how do they differ from funds targeting distressed real estate that proliferated in the wake of the COVID pandemic?
BJ Feller, senior vice president/managing director in Northmarq’s Chicago Commercial IS office, shed light on the nature of distressed assess, noting that “When you’re talking about distressed, you’re talking about something that’s going to be above a 20 percent return on an IRR basis. If you’re jumping into the water and saving a drowning person, you have to be compensated for it.” When it comes to opportunistic funds: “The shorter duration, the more confidence I can have with projections, and that aligns with opportunistic strategies,” he said.
Topics covered include:
- How the strategies differ
- What types of returns to expect
- How long do investors have to wait for a payout?
- Hopes for these types of funds don’t always pan out