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Private equity seen flourishing in real estate markets - Ernst and Young

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November 10
9:50 AM 2013

A report by consultants Ernst & Young Global Limited indicated a proliferation of private equity in the real estate market. Private equity saw little action in the property market for the past five years, International Business Times reported.

Ernst & Young head of global real estate fund services Mark Grinis said, "Private equity funds are heading down a path toward growth. What remains to be seen is if they are in for a brisk morning walk or just a Sunday stroll."

The report by Ernst & Young postulated that the top ten real estate funds had attracted around half of investmen capita. Moreover, Ernst & Young said in its analysis that over 400 funds had been left fighting for the remaining 50% of investment capital.

The report conducted by the global consultants said investors recently required funds to provide better reporting.

Figures from DTZ, a real estate advisory firm, said about USD340 billion of investment capital could go into real estate markets via various machinations or channels. This was most likely because private equity funds would like to obtain a significant portion of capital, IBTimes said.

In heavily-saturated and luxurious cities like New York, London and Hong Kong, the report said a general number of private equity funds had difficulty penetrating such markets. As such, private equity fund turn into high potential markets in cities like Raleigh, North Carolina or Austin, Texas.

A trend was also observed in private equity investors. Private investors in the US resort to "flipping" real estate, which is the process of obtaining homes at low prices and sell then within a six-month period for a profit. CNBC said private equity firms had extended financial help on some of the flipping. IBTimes pointed out one such example in the Blackstone Group LP, which had acquired 30,000 distressed homes for USD5 billion. The private equity firm had since started recuperating its investment by renting the homes out.

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