Structure Private Real Estate Funds by Guy Lotem

1. Structure Private Real Estate Funds by Guy Lotem There are absolutely no troubles of raising the capital on a deal-by-deal basis. The ease with which investments can be made in private real estate funds in private equity have made them rather popular with in the economic and investment scenario. But things are easily said than done, and the game is not as easy as it appears on the outer periphery. Despite the supposed ease of implementation, private real estate funds are structurally complex and the investors are required not to look only into the general interests of the investor and the sponsor, but also reflect on the current market trends. Here are a few considerations by Guy Lotem regarding the launch, development and execution of a private real estate fund. Type of entity The funds are invariably linked to an entity which is either limited in partnership or is a limited liability firm. These types are known as pass through entities, which means that these are passed through irrespective of tax purposes and the profits and losses entitled to the limited partners. Still, it is highly advised to make the investment strategies and plans a discussion point with experienced counsels. This will help in observing the benefits and drawbacks of using a particular entity type. Coming and withdrawing of investors Private equity firms, addressed in the context of growth capital, are prone to much structural rigidity that needs to be addressed. The most prominent of everything is whether to use an open end or a close end fund structure. The open end structure is more flexible, since it permits the investors to enter and exit the firm willingly. But in

2. reality, the illiquid nature doesn't allow for such ease to creep in. The close ended structure, on the other hand enables the investors to join in at the same time, thereby solving the problems faced in the open ended structure. Initial capital admission Private equity investments need unique capital. A 'capital call' is made by majority of investors wherein they are required to make an initial contribution at the time of investment subscription. It is only after the initial contribution that the investors commit the capital by 'calling down' the fund periodically. Guy Lotem is The Managing Director & CFO at Alinda Capital Partners LLC. Alinda Capital Partners LLC is one of the world’s largest investors in infrastructure. Guy specialises in foreign currency hedging, investor reporting, cash management, budget management, FX Options and much more. He creates customized financial models and risk analyses that help people determine where they are headed financially and what they need to watch out for. To know more, please visit here: http://guylotem.brandyourself.com