Download Transcript
Spencer Levy
In this time of volatile capital markets, some real estate investors have sat on the sidelines playing a waiting game. Others have turned to specialized vehicles. And that's what we're going to shine a light on right now. On this episode, secondary real estate transactions and indirect investing, some atypical methods of acquiring real estate.
Jarrett Vitulli
If you think about the amount of assets that are owned by private equity funds today, that's roughly north of $1 trillion, just owned and closed in commingled funds. And so that just sort of gives you a sense of how much potentially could be converted into the secondary market.
Spencer Levy
That's Jarrett Vitulli, a Senior Managing Director at Evercore and one of the global co-heads of its real estate strategic advisory business. Jarrett covers everything from publicly traded REITs to capital markets, M&A and more. But his primary focus is Evercore’s private market business, working on both the fundraising and sell side on behalf of the firm's clients.
Achal Gandhi
Real estate secondaries in itself is not a real estate strategy. It's an execution method. It's just a way of buying and selling exposure to real estate. So what you need is a real estate investment strategy, which you then implement via real estate secondaries.
Spencer Levy
And that's Achal Gandhi, Chief Investment Officer for the indirect real estate business at CBRE Investment Management. His group specializes in investing in global real estate in various different structures, including secondaries, as well as co-investments, joint ventures and more. Coming up, a firsthand look at secondaries, indirect investments, and more in a detailed and informative conversation about how to deal with these highly specialized and not widely known ways of transacting real estate. I'm Spencer Levy, and that's right now on The Weekly Take.
Spencer Levy
Welcome to The Weekly Take and this week we're going to tackle a topic we haven't talked about before with two experts in the real estate secondaries space, led by Achal Gandhi. Achal, thanks for coming out.
Achal Gandhi
Thanks Spencer. Happy to be on.
Spencer Levy
Great to have you. And then we have Jarrett Vitulli, Senior Managing Director of Evercore.
Jarrett Vitulli
Thank you, Spencer. Happy to be here.
Spencer Levy
Achal, let's just start very basically. We entitled today “secondaries”. But you used the term “indirect”. Why don't you tell us a little bit more about how you define indirect investing and what the scope of that is.
Achal Gandhi
Yeah, sure. So indirect investing really is in its simplest form is defined as investing via an operating partner. So my team does not asset manage the assets on a day to day basis themselves. We use specialized operating partners around the world, who specialize in a specific theme, be that student accommodation in Australia, logistics in the U.S., multifamily in Europe. We'll pick a specialist operating partner. They are the experts on the ground, and we will capitalize that operating partner in various different structures. So that's what indirect real estate investing is defined as.
Spencer Levy
Does somebody go into that investment before you? Meaning are you taking somebody out of the original investment rather than you being the originator of that investment?
Achal Gandhi
Yeah. That's right. So that's where we come to secondaries. So secondaries we define as any money being exchanged in the capital stack, but where the operating partner stays in place. So in your example, yes, there may have been a joint venture or a fund structure that had been set up where an investor has put in money with an operating partner already. That investor wants to get liquidity for various different reasons, and they want to sell that position in that investment. So they're not selling the assets, they're selling their position in that investment. And we would be looking to acquire that at a negotiated price. So that's what we define as a secondary. And that comes in various different forms including LP secondaries where the selling is initiated by the LP investor, or GP led secondaries where the sell is initiated by the operating partner themselves, recapitalizing the structure.
Spencer Levy
And just for our listeners, LP is limited partner, typically not the operator, and GP is the general partner, and typically the operator. So Jarrett, how do you define the market and the scope of this opportunity?
Jarrett Vitulli
One, given Achal’s description, which is absolutely correct, the secondary market for private equity is just a derivative of the primary market. So when we say primary market, and for the listeners if you think about global alternative strategies. So Blackstone, private equity, other large commingled funds that are raising capital to invest in private equity strategies of all type, in theory is really what provides the basis for the secondary market. So if we look at a couple of different data points, the size of the real estate market in the U.S. is roughly $16 trillion. So if you think about that as one data point, that sort of gives the basis for potential recaps. Secondarily, if you think about the amount of assets that are owned by private equity funds today, that's roughly north of $1 trillion, just owned and closed in commingled funds. And so that gives you a sense of how much potentially could be converted into the secondary market. And then at Evercore, we just released our biannual secondary market survey, where we compile stats on the size of the secondary market. And to give you one other data point, we're on pace this year for a $140 billion of secondary transaction volume. Now that's across all private equity strategies, which would include private equity, venture capital, infrastructure, credit, and real estate. So real estate will just be one part of that. But it still gives you a sense of the scale of the overall market in total.
Achal Gandhi
We've tried to quantify the scale of the real estate secondaries market ourselves, and Jarrett's right. The data points on this are all mixed. But if I look at our own pipeline over the last 12 months, just our own pipeline of secondary market transactions in real estate amounts to $17 billion. So that's significant. We then used an AI bot, actually, to go out there and scour all the different publications for potential secondary transactions. And actually that then returned our pipeline list, which was three times in excess of the 17 billion. So the market is considerable and it's growing going forward.
Jarrett Vitulli
That's a really good point. There are a couple of data providers that will report on fractional real estate transactions. So these are real estate transactions where not 100% of the equity was transacted. So it kind of gets back to your definition. And for 2022, that number was approximately $30 billion.
Spencer Levy
Can you give us a little bit more color of what this AI bot thing is that you use to try to find the size of the market.
Achal Gandhi
There are probably people on my team, or not probably. Definitely people on my team much more qualified to talk about this than I am. But essentially what it is is the ability to program, essentially, an AI algorithm to go out and search a number of different real estate publications out in the market for certain words and phrases related to secondary transactions. So things like LP secondary, GP secondary, recaps, etc. and then gather all of the data points that come back from that. And we're then able to sift through that information to amalgamate what we think is the transaction volume in secondaries. So there you go. That's my best. Over 40 year old explanation of what an AI bot is.
Spencer Levy
So I'm going to back up for a second here. Could one of you just distinguish between what people consider to be fractional ownership in the private, individual market versus the institutional market? Maybe Achal?
Achal Gandhi
Yeah, sure. Fractional ownership is nothing new in terms of making primary commitments. When you make a primary commitment to a large fund, you are taking a partial ownership of that structure. So, all that's happening on the secondary market is that you are buying another LPs interest. And in exchange for buying that LPs interest into that fund structure, you are buying that at a negotiated price between you and the seller. Now, I want to be clear that that is for LP secondaries. For GP-led secondaries, typically you are able to go higher on the ownership stack and take really majority states. And then we'll come on to the differences between LP and GP-led secondaries. But that really is the difference in terms of fractional ownership.
Spencer Levy
And so fractional ownership is I guess just a very broad term. What you're providing here is two things. From the buyer side, you're getting opportunities to get into real estate without there being a transaction of the real estate, which is extremely attractive because transactions, even on their best days, take 90 days from thought to finish. And on the seller side, you're providing liquidity. So let's talk about that for just a moment. From the buyer side, let's start on the buy side since that's where you are Achal. Tell us about the primary benefits of this versus buying directly. And then we'll go to the sell side.
Achal Gandhi
The primary benefits of going via the secondary route are firstly, you have complete visibility of what you're investing in. So if you invest in a blind pooled fund, then in that instance you are investing in a strategy, but you're not investing in real estate assets. You are investing in the theory that your operating partner can execute in that strategy. In this instance, you're buying into an existing pool of assets which have, by and large, gone through their business plan and are largely stabilized. But you are circumventing that entire J curve and coming in at a later date in that business plan and coming in generally at a discount because of the liquidity premium. Not only that, but you get immediate drawdown. So your capital is invested into the market on day one versus committing to a primary fund where you would be drawn down over a number of quarters.
Spencer Levy
So let's stay on the buy side, and this discount. What kind of discounts are we talking about here to, if you were to trade that asset in a marketed transaction?
Achal Gandhi
That really does depend on where you are in terms of the cycle and what kind of capital markets environments you're trading in. If we look at the environment today, there is broad based capital markets dislocation. So if you look at liquidity and availability of liquidity today, that's curtailed on the equity side. A lot of investors are still on the sidelines. And also debt is not accretive. We are on the cusp of interest rates coming down. But if you're looking at where cost of debt is today, it's not accretive. So when you put both of those factors together, that curtails liquidity. So if you are a seller and you have to sell for whatever reason, at this point in time you would be selling at a discount really to engender liquidity. So for our preferred strategies, strategies like logistics, residential, health care related real estate, we're seeing discounts in the 15 to 30% range. And then you're seeing larger discounts, which potentially are more challenged, like the office sector.
Jarrett Vitulli
The public market tends to be mostly stabilized real estate held at relatively low leverage levels, and between the public market and all of the research analysts that provide estimates of that asset value, combined with the impact costs, which are incredibly low to execute a trade, the variance maybe between intrinsic value and where somebody can transact at at any given time, just because the liquidity is so high, that variance may be quite small, barring periods of extreme volatility. In the private market, it's sort of a question of like a discount to what? And the reason I'd say that is one, a lot of the real estate tends to not be stabilized yet. So i.e. you're doing a development project, you're buying a building that's going through a major capital improvement investment to change the NOI. So that's kind of one. And then number two, each of the GP's goes through what I would call like a mark to model valuation, i.e. you can't just apply a direct cap rate to the NOI and come up with the value. You're making a projection many years out in the future and discounting that back and saying this is what I think today's value is. On the one hand, it's sort of a discount to where it's marked by the GP, and that creates one element that somebody looks at. And then the other element is what do I think is intrinsic value? And then where can I buy? Honestly, the more relevant question is what is buyer and seller think the intrinsic value is? And then obviously where it's marked, it just provides another frame of reference.
Achal Gandhi
That phrase of “discount to what” is key when you're doing real estate secondary transactions because a number of investors get seduced by discounts, but if the underlying assets are overvalued or there is some sort of appraisal lag, then that discount can get eroded pretty quickly. So you do need to be able to underwrite the underlying real estate. You need to be able to establish what intrinsic value is, and then set a price based upon that.
Spencer Levy
Jarrett, let's turn from the buy side now to the sell side. Talk about the primary attractiveness to the sell side of selling into the secondary market.
Jarrett Vitulli
Yeah, quite simply, just similar to the public market, how you have portfolio managers that will look to rotate into and out of stocks over time and potentially overweight or underweight different sectors, the secondary market for institutional investors… so think about the sovereign wealth funds, the pension plans, the endowments and the foundations has really just become a portfolio management tool over time, which allows them to monetize some of their investments that either they believe have diminished prospects for future returns or have migrated to be a non-core component of their overall strategy. And they will look to monetize that and redeploy the capital into what they believe are higher conviction strategies. So, quite simply, it is just a portfolio management tool. And as the secondary market grows in size, when I referenced, again, approaching potentially this year 140 billion. As the market sells, the buyers get larger themselves, and it creates almost a virtuous circle in some respects because it creates more opportunities for sellers to effectuate portfolio management.
Spencer Levy
And I don’t want to focus too much on liquidity, but to me, liquidity is maybe the single biggest key because you're giving liquidity to something that is typically illiquid. Would you agree with that?
Jarrett Vitulli
I totally agree with that. The only caveat I would say is we've been advising in this market now for 20 years. The number of times that somebody executes a trade purely because they are liquidity constrained tends to be pretty low. Moreover, I think as we've gone through some cycles from the tech collapse to the GFC to now what we're going through now, I do think people have indexed higher on preserving a higher base of potential liquidity buffers. But I think broadly speaking, it's the ability to create liquidity to your statement in an illiquid asset class and then redeploy that into other strategies. And I just want to be careful to differentiate between somebody that's truly liquidity constrained, i.e. a market seller at any price for liquidity. That we see very little of. But yes, it's people that are looking to create liquidity to do something different.
Spencer Levy
This is a different transaction structurally than a traditional real estate buy and sell transaction. But most of our listeners do the traditional transaction. They don't do this. Can you just walk us through one brief case study of, we just bought X, this is how we did it versus a traditional real estate transaction. Maybe I'll start with you, Achal. Any color?
Achal Gandhi
Yeah, sure. So, I'll talk about a transaction that we executed pretty recently. And this was an LP secondary into a portfolio of U.S. logistics assets. And really, the background to this transaction was that there was a large institutional investor that had made a portfolio construction decision to come out of real estate funds that it held around the world. They came to a few kind of trusted parties. We would cut visibility across their portfolio of funds that they were looking to sell. And we picked this specific vehicle because it had a very strong operating partner. It had a sector which was favorable to us, which was logistics, and very strong assets. So in this example, we were able to secure exclusivity with the seller. The seller was selling a portion of the fund – so it owned close to 15% of the overall vehicle; that's what they were selling. And we were able to underwrite the assets in a brief time, negotiate a discount, and because of our execution speed, our, I'd say, ability to be a reliable partner, we were able to transact on this and close on the transaction. So this essentially represents buying into a stabilized portfolio of logistics assets, highlights the core of the discount to get to an enhanced level of return.
Spencer Levy
How long did that transaction take from thought to finish, and how long do they generally take?
Achal Gandhi
Yeah, I'd say LP secondaries have a much shorter fuse than your typical kind of direct real estate transactions. So this particular one from start to finish was roughly around three months. But LP secondaries can take even just four weeks in terms of executing those. So it's a shorter fuse. GP-Led secondaries can take longer and are potentially more akin to direct type transactions.
Jarrett Vitulli
They can be much, much faster. Part of the reason is, you're not even doing all the conventional real estate diligence that you would do in a direct transaction. So all the confirmatory, property condition records, kind of lease estoppels, environmental survey. Because you're buying into a portfolio of assets and the ownership is not changing and they conceivably already did all that when they first made the acquisition, a lot of that stuff is just not relevant. The easiest example in terms of a case study, how we typically explain it is, if you were a pension plan in the U.S., you might have, let's just say, 10 to 15 different investments in a range of real estate sponsors. And from time to time you may look to sell those. So you just run an organized marketing M&A sell side process, where you market those interests to a third party that's going to buy them on the secondary market. So nothing's changing at the fund level. Nothing's changing at the asset level. It's just that fractional ownership that is currently owned by a U.S. pension is being sold to a secondary market investor.
Spencer Levy
Jarrett, let's now turn to the GP side. So I totally get the LP side of why an LP might want to mix their portfolio balance. We hear about what's known as the denominator effect. You probably hear that term every day. And first explain what the denominator effect is. How that impacts the LP market. And then let's shift to the GP market.
Jarrett Vitulli
What people are talking about, kind of the denominator effect. You know, typically a private pension has their allocation set as a percentage value of their total assets under management. So if a pension has total assets of X, they'll say 20 to 30% of that is going to go into private investments. And so as you have movements in the public market, the listed stocks, which have their cost of capital adjusted every day to the extent that declines in a material basis, that can influence how much free capital they have, in theory, to invest into new private equity strategies. So that impacts kind of generally fundraising. But that's not the only variable. The other variable is how much money is being returned back to the limited partners. And just kind of case in point, if you look out over the last two years, distributions back to limited partners from closed end funds are down on balance almost 60% relative to 2022. So it not only has the denominator effect impacted some of the pensions, although we've recaptured much of that over 23 and 24. It's also been enhanced because of the distributions. The general partners themselves have been very slow to return capital back.
Spencer Levy
And let's define what these distributions are, because I think the distributions fall into two basic categories. One is return on income, which is dividends. And the other is return of capital. And I think that's the portion where we've seen this material fall, because the market has become, in the last two years, largely illiquid as compared to where it was in 22. Is that a fair way to put it?
Jarrett Vitulli
100%. And then for most of the funds that are higher risk strategies, their returns of incomes tend to be pretty nominal. Certainly that's the case in the early years of their investment cycle. And most of the capital, most of the return, is upon sale of the asset.
Spencer Levy
So Achal, would you say that this is one of the best times to be in the business? And how would you compare this to a peak market like we had, say, in 21 or 2018?
Achal Gandhi
So we see this is one of the most attractive vintages for real estate secondaries investing. And the reason for that is because of this lack of liquidity, but also this general acceptance of transacting through the secondaries market. So secondaries as a whole within the real estate sector have been evolving and growing. We're still probably five, seven years, Jarrett will know better than me, behind private equity secondaries, which is a much larger volume. But this is becoming a more and more accepted way to transact. So when you put those two things together, this is just an incredibly attractive vintage for us, and a similar vintage to what we saw back in 2010, 2011, where we were seeing very good quality funds or joint venture structures and a lack of liquidity in the market, and therefore the ability to access these structures at discounts. So, a very similar vintage to that vintage.
Spencer Levy
Jarrett, I think there's two basic categories of GP's. I think one basic category of GP are the large fund investors, the Blackstone's of the world. But then there's also the direct real estate operator at the property level that may have a $1 billion portfolio. And those are two very different types of GP's. How do they act differently in the secondaries market?
Jarrett Vitulli
Yeah. So I mean, in a classic sense, the Blackstone's of the world that you referenced, those are what traditionally are known as the general partners, because they are the GP's of the private equity kind of commingled funds. And then they're typically providing capital or allocating capital to the operators that you mentioned. Now, I think the reality is in the secondary market, at least the way that we look at it, both groups can effectuate a GP-Led transaction, whether it's the operator that pursues a specific strategy or if it's a classic GP that has organized capital in a commingled fund. So I think either scenario works. And I think the reason that they pursue these transactions are pretty varied and all driven, you know, not to sound like a lawyer, but facts and circumstances dependent. So one would be real estate historically has been a great asset class to aggregate assets into and then migrate them down into a lower cost of capital vehicle. So I'm going to develop 20 self-storage assets in my closed-end fund. And that's going to have a much higher cost of capital to it. But once they are approaching occupancy or I've been delivered at C of O, I'm going to migrate them down to a lower cost of capital. So you might see in one scenario, if I'm a self-storage operator, I'm going to develop in a high cost vehicle. And then once I've delivered this corpus, some investor’s going to value owning that income stream for the duration. And just given it is such a small asset class, it may not make sense for a very, very large investor to go do the micro-aggregation. So that's one example. I think on the sponsor side, clearly they can replicate that same strategy, which is replicate in an asset class and bring it into a lower cost of capital. But in many cases, if you're a GP, if let's just say you've built and acquired a large platform that is now operating as an independent company, and you'd like to spin that company outside of the confines of a 8 to 10 year closed-life vehicle, you will use the GP-Led strategy to spin that asset out of your fund and basically recapitalize it with new investors and a new investment vehicle that's aligned with the strategy of that asset.
Spencer Levy
And the beauty of that transaction is manifold: liquidity, lower cost of capital, and no actual transaction at the property level, which means that the transaction cost, time, risk of execution, is a lot lower than you would in a traditional sale. Is that, did I sum up the thought process, generally speaking, fairly well?
Jarrett Vitulli
Generally speaking. I mean, you still have transaction execution, for sure. But there are other potential risks specifically related to tax and/or porting existing debt that may be hard to replicate in today's market, that are all components of why somebody might pursue a strategy like this. But the other one that's equally as important, which is deeply valued, is that the investors in the fund for the GP that is executing this, they typically will get the ability to either keep their ownership in the investment or monetize at the market-determined price. And that's not typically an option that's afforded to investors when a GP decides to sell. So in essence, you're providing optionality back to the investors, which has really been critical to driving the growth in this market.
Achal Gandhi
If you think about this from an investor perspective, real estate across the board, across all sectors, is becoming more operational. So having a specialist operating partner is key to drive returns at the asset level. Some of these specialist operating partners that Jarrett has kind of given examples of, if they roll these assets into a new structure, these assets are never hitting the direct market. So these assets are always going to be recapitalized. So as an investor, to get access to some of these best quality assets and best operating partners, you need to have some sort of strategy where you can access recapitalizations, GP-Led secondaries. And as a result of that, this is becoming an increasing part of an investor's armory when they're investing in commercial real estate.
Spencer Levy
Which asset types are you seeing the most opportunities today and which are you seeing the least and why?
Jarrett Vitulli
We're in a market today that is a bit bifurcated, right? So there are asset classes that people feel like have very strong tailwinds and are deemed to be investable. And then you have other asset classes that the market has decided are facing extreme headwinds. And there may not be a price for such asset classes. So that's one concept. The second concept is, over the past really ten years, the market has been marching to what I would call non-traditional real estate asset classes. So these are things that are not malls, not multifamily, not office, and not industrial. And the asset classes have been everything from student housing or student accommodation in Europe as it's called, self-storage, medical office, life science, studio assets, and the list kind of goes on and on. And just to give you a couple data points, the public market is probably close to 60% nontraditional today. The average private investor is less than 20%. So the private market continues to strive towards getting into these nontraditional asset classes. And to Achal’s point, given some of the asset classes are a little bit newer, they're a little bit more fragmented, in theory, recaps are probably one of the better ways to get exposure, if not, the only way. And in terms of like, opportunities, I think it's sort of all over the board, but industrial, there is continued opportunity in industrial asset classes, given how much development has gone on over the last five years, and that a lot of that development capital will need to get recapitalized out. You're still seeing a number of opportunities in multifamily, although it varies quite a bit by region, and by market. And then other forms of really what I would call differentiated housing. So this could be student housing, it can be senior housing, it could be manufactured housing. Other forms of housing, both in the public market and in the private market, has been in significant demand. And then there's other areas where there's going to be and has been a lot more distress. And so office, where there's been a lot of distress that's been talked about, specifically in the Gateway City markets, and how much refinancing will need to become due. But then you've also had other asset classes, whether it's been in life science or others that have been heavily development focused, where there have been other kind of pockets of distress that people are looking at, but maybe not totally sure how to invest and attack that distress.
Achal Gandhi
Yeah. And I think maybe just putting some numbers on what Jarrett just mentioned from my perspective. So, we manage $42 billion of assets under management. And in terms of the sector breakdown of that, 85% of that AUM is invested in logistics, SFR, multifamily, student accommodation, senior housing, life sciences, and medical offices. So we only have close to an 8% exposure to traditional offices globally, and close to a 7% exposure to malls globally. So that gives you a sense, completely chimes with, kind of, Jarrett’s view of the world. But stepping back, I just want to make it clear that real estate secondaries in itself is not a real estate strategy. It's an execution method. It's just a way of buying and selling exposure to real estate. So what you need is a real estate investment strategy, which you then implement via real estate secondaries. And that's why it's really important to understand these thematics and demographic and structural trends, know which sectors, which markets you want to invest in, and then access those via the secondaries route.
Spencer Levy
This has been a really, really interesting discussion. What do you do if you want to get into this market and how?
Achal Gandhi
Yeah, sure. So firstly, I guess what I'd say is that secondaries can be used across the risk spectrum. So as Jarrett mentioned, it's a frequently used tool for portfolio management, either trimming positions, growing positions. To actually execute on a secondaries basis, you really need to have a kind of strong internal team that is able to execute and underwrite the real estate. Or you use advisers such as Jarrett or investment managers such as ourselves. So there's various kind of routes to access secondaries, but I think the secondaries landscape has changed pretty dramatically over the last 15 years, where 15 years ago, it was really just a financial transaction where you were putting a big blanket discount on a large book of LP secondary positions. Whereas today it's really about underwriting the real estate at an asset level, understanding that real estate, understanding the intrinsic value of that, and then back solving to a discount that gets you to your prospective return. So having that on the ground real estate expertise is key. And that's essentially how… the kind of three principal ways of accessing the market, either with an internal team that can underwrite or using advisors or an investment manager.
Jarrett Vitulli
The best assets and continuing to aggregate real estate and the benefits that that confers in terms of understanding operating performance, having local market insight, which still drives much of the real estate market, is extremely valuable, which is why it's made this strategy so compelling. And then the other part, quite frankly, honestly, is just demographics, right? So the second largest demographic cohort in the U.S. are the baby boomers. They obviously are continuing to go through an allocation shift in their own portfolios as they shift to more fixed income strategies away from public equities. And there's no question that real estate, particularly short duration real estate that can be an inflation hedge, is going to play a huge role in that, for that potential investor cohort. And again, all of that should translate very, very well and makes secondary strategies a very compelling opportunity for them.
Spencer Levy
Jarrett, how do you see the real estate segment of the secondaries market evolving over the next couple of years? How long is this window of great opportunity going to last? And maybe once this window of opportunity for this dislocation closes, maybe a new one will emerge. How do you see it, Jarrett?
Jarrett Vitulli
Maybe my perspective is either biased or jaded. You could pick the term. Just because we've been at this now for 20 years. There's no question, given the dislocation in the capital markets over the last couple of years, this undoubtedly will present a great investment opportunity. And obviously secondaries I do think will benefit from that. But I think once this dislocation is over, whether it lasts another 18 months or potentially three years, I don't think the broad trend lines are going to change, which is continued growth. If you look at the secondary market overall, it's grown at a roughly 15% CAGR over the last ten years. And I bet if I went back prior to that, it’s probably averaged that for 20 years. That's an incredibly high growth rate. And so I just think that that is going to continue as investors demand more fractional liquidity, more ability to create and execute portfolio management. And then for all the reasons that we talked about in ways of accessing these assets, how it provides for a differentiated source of return. I think all of those things are going to continue. And I just see continued market acceptance, continued growth in assets, particularly on groups like Achal’s and others that are organizing capital to prosecute the strategy.
Spencer Levy
For our listeners, CAGR stands for compounded annual growth rate. Achal, how do you see the next several years and beyond for the secondary market?
Achal Gandhi
I don't disagree with Jarrett's view on this. I think that the secondary market is growing in prominence. It will continue to represent a larger and larger share of overall commercial real estate transaction volumes. And as a result of that, you will have more investors playing in the secondary market to access real estate.
Spencer Levy
Well on behalf of The Weekly Take, I really want to thank our guests for a terrific discussion today of secondaries. Starting with Achal Gandhi, Chief Investment Officer for Indirect Real Estate, CBRE IM. CBRE Investment Management. Thank you so much.
Achal Gandhi
Thank you.
Spencer Levy
And then Jarrett Vitulli, Senior Managing Director of Evercore. Thank you so much, Jarrett. Great discussion.
Jarrett Vitulli
Thank you very much for having me. A lot of fun.
Spencer Levy
For more on this relatively obscure corner of the real estate investment business, check out our website, CBRE.com/TheWeeklyTake. For related content, including the CBRE Cap Rate survey for the first half of 2024, check out CBRE.com/Insights, as well. We'll be back soon with deeper dives into other products and projects that are at the forefront of our industry right now. That includes the state of the real estate development business, a look at housing affordability, and more. For now, we hope you will share the insights on this program, and also remember to subscribe, rate, and review us wherever you listen. Thanks for joining us. I'm Spencer Levy. Be smart. Be safe. Be well.
.jpg)
