What is private real estate?

Private real estate is usually held through funds or joint ventures that own properties directly, unlike listed REITs, whose shares trade on a stock exchange. Strategies run from core, which owns stable, rented buildings for income, to opportunistic, which develops or repositions property for growth. Values are estimates, often based on appraisals, until a property is sold, and purchases are often partly paid for with borrowed money, more so in higher-risk strategies.

Say a fund buys a building for $100 million that earns $5 million a year after running costs. If it sells five years later for $110 million, it has collected $25 million of income and made a $10 million gain. Simple example. Terms vary by fund.

Its income comes from leases while its value moves with interest rates and cap rates, so a building can keep earning the same rent and still be worth less.

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