In an article published June 10, 2020 by GlobeSt., investment management lawyers Brian Farmer and Brian Daly outline strategies for real estate fund managers to consider when responding to the changing market dynamics related to COVID-19. Farmer and Daly detail several considerations for managers as they weigh three different strategies, including:
1. Extend the current fund’s investment period to preserve capital already committed by investors. This option is most useful for fund managers who see immediate buying opportunities in the current economic environment.
2. Wind up the current fund’s investment period early in order to launch a successor fund with fresh capital, which is a strong decision for managers with modest uncalled capital commitments left in their current fund.
3. Continue operating the current fund on a status quo basis. This strategy makes sense for managers that see a pressing need to focus on the current fund’s existing portfolio.
“Five years from now, real estate fund managers may look at the current environment as one of the best buying opportunities since the 2008 financial crisis,” Farmer and Daly say. “Selecting whether to extend the current fund or launch a successor fund in the current environment may be one of the critical decisions a real estate fund manager makes this decade.”
Luis F. Ruiz