01. March 2023


The real estate industry is transforming at an unprecedented speed, with market uncertainty, raising interest rates, inflation, fear of recession and geopolitical tensions acting as a catalyst for change. Technological developments in proptech, the impact of ESG criteria and the changes in the way people live, work and shop are having a profound impact on all aspects of the real estate value chain, including how family offices and institutional investors allocate their capital. What are the emerging investment trends in real estate investing? How can professional investors take advantage of market opportunities and manage their real estate exposure in the current fast-changing environment

 A recent report on the investment sentiment of institutional investors for 2023 in Europe shows an increased appetite for distressed value-add opportunities as investors look to capitalize on pricing discounts. According to the study, office in prime locations with excellent sustainability ratings and residential are the most in-demand asset classes. My own experience with family offices is that they are active in market screening for distressed real estate opportunities and are willing to take advantage of the current environment. A study by PWC outlined that the number of family offices participating in club deals has strongly increased with Germany, UK and the US being the most attractive markets for real estate club deals.

This trend highlights a shift from blind pool investments toward a more targeted direct real estate allocation. Blind pool fund investments have for decades been the investment method of choice used by professional investors to allocate capital. They offer a high degree of diversification, a standardized setup and a one-stop solution for the investors. However, due to constraints like their rigid investment guidelines, commitment-based approach and higher cost structure, the alternative real estate club deals have become a preferred investment method for professional real estate investors. Real estate club deals have become a key offering in the industry. According to PERE, the top 20 managers raised more than US$29 billion in funds for sidecar investments. Over the last six years, an average of roughly US$36 billion exchanged hands in partial-ownership real estate transactions per annum, representing between 6.3% and 9.5% of the private real estate transaction market.

We reported that based on industry studies as well as market signals, the demand for club deals is likely to remain high. Unlike blind pool investments, club deals offer the investor a higher degree of transparency and control. Real estate club deals, therefore, represent a powerful tool for family offices and institutional investors to adapt to challenging investment environments, such as the one we are currently facing. Key advantages are the flexibility to react to a changing investment landscape and focus on investments in real estate growth areas. More importantly, capital can be instantly deployed in a targeted manner. Investment fee levels for club deals are lower compared to blind pool funds, resulting in higher investor returns. However, it's important to keep in mind that real estate club deals are most feasible for professional investors who are willing to accept the higher complexity of these investments. The transactions usually are time-sensitive and require a certain speed of execution. The nature of these investments come with certain regulatory and compliance hurdles to overcome. 
Club Estate, a leading provider of real estate club deals offers services and access to vetted opportunities, and investors are able to opt-in on a deal-by-deal basis. By investing alongside the investment manager, interests are aligned. This alignment and the transparent, direct exchange of information between investors and the investment manager are key to unlocking the full potential of each investment. Depending on the ownership levels, control rights can be negotiated on a case-by-case basis. 
For asset owners and fund managers real estate club deals offer a viable alternative to reach an additional investor audience, re-capitalize on existing assets, grow their AuM and re-focus their asset management strategy on a single asset level. Club Estate offers fund managers a plug and play solution to build a professional club deal platform. Given the higher complexity in structuring, managing investor relations and reporting for single opportunity transactions Club Estate is focused on the key challenges executing the deals. We use our proprietary technology platform to efficiently manage the process.

In the context of their existing real estate allocation and liquidity needs, professional investors are able to create customized exposure to fast-growing real estate segments. What I emphasize to investors is how a systematic deal selection and underwriting process is key. A thorough selection process helps ensure partners are trustworthy and best-in-class when it comes to their respective expertise – and their knowledge of region, sector and style. The track record of completed deals, senior management team, as well as incentive or governance structures should all be thoroughly assessed.

In a fast-changing investment environment, real estate club deals offer a targeted investment approach with a focus on high growth segments in the market. They give investors the possibility to participate in attractive opportunities on a deal-by-deal basis, making them an attractive alternative to blind pool fund investments. Investors can use real estate club deals as a tool to navigate through the ever-changing real estate investment landscape and generate attractive risk-adjusted returns.