Private Real Estate - Secondaries

Over the past 20 years, the Partners Group real estate team has developed and maintained longstanding relationships with more than 100 partners worldwide. These relationships provide the secondary platform with unique deal flow and access to asset and market information across the globe, which is a key competitive advantage.

In 2011, Partners Group sourced approximately USD 20bn of real estate secondary opportunities globally. The robust pipeline activity allows the Partners Group’s investment committee members to be highly selective in their investment decisions.

Partners Group evaluates secondary transactions using a bottom-up approach, which is a critical path towards underwriting and understanding the underlying properties. In each transaction, the firm develops a solid and in-depth understanding of the value drivers for each of the portfolio investments and develops its own proprietary analysis to project cash flows on the property level.

Example – private real estate secondary investment (retail assets in China) 

Portfolio. Partners Group acquired an interest in a portfolio of high quality income producing assets throughout Greater China at an attractive discount during the first half of 2009. The local partner is a reputable property firm with whom Partners Group had a pre-existing relationship. The opportunity was identified during an on-site due diligence meeting for further investment opportunities and the circumstance illustrates the value of an integrated real estate platform, as well as pre-existing firm relationships.

In-depth knowledge. Partners Group had already visited all major properties in the portfolio, allowing the team to quickly evaluate and price the opportunity. The largest asset offered an attractive value proposition with an annual cash-on-cash yield of approximately 25% and in place rents 50% below current market rents providing significant upside potential. The investment presented an attractive opportunity given Partners Group knowledge and familiarity with the assets, partner and market.

Return. The interest was acquired at a 50% discount to Partners Group fair market valuation with an annual cash-on-cash yield of approximately 15%. Within eight months of closing, 75% of paid in capital was returned and Partners Group projects outperformance from its original underwriting at a 2.3x multiple and 23% IRR.

Martin Scott Head Sydney
Nan Leake Private Real Estate Americas

Tyler Jones Private Real Estate Directs

Claude Angéloz Co-Head Private Real Estate