By: Paul Parker, Paul Mehlman and Andrew Holmberg
Over the course of the past year, Landmark has been approached by numerous investors and market participants asking about the true level of activity and opportunity to acquire real estate fund and partnership interests through the secondary market. The simple answer is that the dislocation, which has impacted the global economy and specifically the real estate sector, has stimulated activity in the real estate secondary market. However, to elaborate it is necessary to go beyond the market disorder and consider the significant growth of private real estate fund commitments made in recent years. It is the increased base of commitments to private real estate, in parallel with the current disorder, which has propelled the real estate secondary market to come of age. In this paper we will present Landmark’s data regarding historic transaction volume within the real estate secondary market. The data reflects the fact that transactions are happening in the current timeframe and that the market has been growing in parallel with the increasing base of private real estate fund commitments. We will also draw from our experience in the private equity secondary market to project how we see the real estate secondary market evolving by evaluating the level of recent historic commitments, or “inventory” of potential secondary transactions, which we believe will drive annual real estate secondary trading volume up to $1.5 billion to $3.0 billion per annum in the coming years. Landmark is seeing this play out in our pipeline, which as of August stands at more than $4 billion of potential acquisition opportunities.