Window of Opportunity
As with any financial investment, it is important to determine the correct entry period for real estate funds and there is never a distinct signal that tells investors when it is time to commit. Due to the time-intensive investment process and lack of liquidity associated with real estate funds, it is difficult to define a market bottom or top. Currently, the general sentiment is that the real estate market is at or near its lowest point. Many institutional investors recognize this as a potential opportunity for a worthwhile entry point, but they are still hesitant to make a commitment.
Speaking to hundreds of institutional investors on a weekly basis, a core group of analysts at BHA has recognized a noticeable uptick in demand for several real estate strategies. During our weekly investor interviews at the tail end of February and beginning of March, real estate fund investors emphasized their interest in managers that are utilizing core and core plus strategies. To be exact, 80 percent of the real estate investors analysts interviewed in the first week of March specified an interest in core plus strategies. This is a significant uptick from February, where 60 percent of interested real estate investors were looking at core plus strategies.
This past week, a large corporation headquartered in Illinois submitted an interesting mandate. While speaking with a BHA analyst, the director of portfolio management specifically mentioned an interest in hearing from both core and core plus funds that are focused on U.S. projects.
The director emphasized that $80 million of the fund’s assets are scheduled to be allocated throughout 2009. When asked about sector interests, the director said that the corporation is open to hearing from fund managers working in either the residential, commercial, or industrial sectors. The corporation expects to earn double-digit returns from such investments and plans on conducting at least three months of due diligence when evaluating potential funds.
This trend helps better outline the elusive window of real estate investment opportunity. BHA’s unique research methods give analysts the ability to capture in real time institutional investors’ sentiment and status. After capturing this data, analysts are better able to connect fund managers with potential investors using our proprietary lead matching technology.