Replay - Secondaries Investing Is an Underutilized Risk Mitigation Tool for Real Estate Investors

Our recent webcast "Secondaries Investing Is an Underutilized Risk Mitigation Tool for Real Estate Investors" features insights from Kilian Toms, Managing Director at CBRE Investment Management, and Michael Yang, Senior Managing Director at CBRE Investment Banking. This engaging discussion explores the growing significance of secondaries investing from both the “buy-side” and “sell-side” within the real estate sector.

The speakers highlight that the real estate secondaries market has been expanding, although its full scope remains challenging to quantify. The definition of secondary transactions is evolving, encompassing various equity exchanges within real estate ownership structures, including recapitalizations. Toms and Yang estimate that actual transaction volumes may be two to three times higher than the reported figures, reflecting the dynamic nature of liquidity in real estate investments.

As inflation and interest rates rise, the demand for liquidity has surged, prompting investors to consider secondary transactions as a viable alternative to outright sales. This shift allows owners to retain assets longer while still accessing capital through recapitalization strategies. The speakers emphasize that secondaries are increasingly seen as a pathway to prime assets that might not otherwise be available in the primary market.

The advantages of secondaries are particularly relevant in today's uncertain environment. Investors benefit from reduced J-curve risk, greater visibility into cash flows and the opportunity to potentially purchase assets at discounted prices and mitigate risk through partnerships with existing owners who possess critical operational insights.

Looking forward, Toms and Yang predict continued growth in the real estate secondaries market, driven by an evolving understanding of risk management and liquidity solutions. As investors become more informed about the benefits of secondaries, the market is expected to mature, necessitating a higher level of expertise and tailored solutions to navigate the complexities of real estate transactions. The webcast serves as a valuable resource for investors seeking to enhance their portfolios through innovative strategies in real estate secondaries.