Forecasting Returns in Public and Private Real Estate
Investors can access real estate exposure through publicly-traded REITs as well as private vehicles.
• Public REITs emphasize stabilized income, whereas value-add private real estate focuses on capital appreciation through operational improvements.
• Our research suggests that private value-add real estate presents attractive growth prospects, reflecting a premium for accepting illiquidity and execution risk, as compared to public REITs
• We believe public REITs and value-add real estate represent distinct exposures and should be viewed as complements—not substitutes—within a diversified real asset allocation.
We recently added value-add real estate to our target asset allocations. In discussions about the strategy, several investors have asked about publicly traded real estate – REITs (real estate investment trusts) – as a substitute for private real estate.
In this article, we provide a brief description of the types of investments found in public REITs and value-add real estate along with industry outlooks. It is our conclusion that public and value private real estate are complements, not substitutes, within a portfolio. In fact, we recommend target allocations to public REITs in our equity strategy, private REITs in our Alternative Income strategy, and now value-add real estate as part of a private investment strategy.
Forecasting Returns in Public and Private Real Estate
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Any views expressed above represent the opinions of Mill Creek Capital Advisers ("MCCA") and are not intended as a forecast or guarantee of future results. This information is for educational purposes only. It is not intended to provide, and should not be relied upon for, particular investment advice. This publication has been prepared by MCCA. The publication is provided for information purposes only. The information contained in this publication has been obtained from sources that
MCCA believes to be reliable, but MCCA does not represent or warrant that it is accurate or complete. The views in this publication are those of MCCA and are subject to change, and MCCA has no obligation to update its opinions or the information in this publication. While MCCA has obtained information believed to be reliable, MCCA, nor any of their respective officers, partners, or employees accepts any liability whatsoever for any direct or consequential loss arising from any use of this publication or its contents.
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