Drew Breneman’s Post

This week, we launched our whitepaper shedding light on the increasing participation of smaller investors in the secondary market, made possible by the increasing sophistication of digital infrastructure like Palico. We also heard from Partners Group’s CEO, David Layton, who sees the LP side of the market continuing to dominate deals as investors attend to their portfolios. Meanwhile, Patria Investments is on its way to reaching an interim close on its first mid-market secondaries fund since bringing UK asset manager Abrdn’s PE business under its wing. I - Palico has released a whitepaper titled ‘Unlocking the Power of Private Capital Secondary Markets: A Guide for First-Time Sellers,’ highlighting the evolving landscape of the private equity secondary market. The report reveals a significant shift in the investor base, with smaller LPs and non-traditional investors increasingly participating. In 2024, Family Offices account for 45% of sellers on Palico, up from 36% in 2023. This trend reflects the growing interest in active portfolio management and the need for liquidity across all investor types. We believe that smaller transaction sizes will become increasingly viable as digital secondary marketplaces lower the barrier to entry and allow LPs of all sizes to list fund stakes in a secure and competitive environment. If you haven’t already read the report, you can find it here: https://shorturl.at/HfOlv II - Patria Investments, a Nasdaq-listed Latin American firm, is making strategic moves in the mid-market secondaries space. Following its acquisition of abrdn's private equity business, Patria is now raising its Secondaries Opportunities Fund V with a target of $500m. The fund is garnering significant interest, with a cornerstone close expected next month and a first close in September, and aims to deploy 65% of its capital in LP-led transactions. Despite having $40bn in AUM, the team keeps tapping into the less crowded mid-market, a segment that’s overlooked by larger players focused on billion-dollar portfolios. III - Recent observations indicate that LP portfolios are currently the engine driving most secondary deal flow. Partners Group CEO Dave Layton highlighted this trend during the firm's H1 2024 business update, noting that institutional investors rebalancing their portfolios represents the largest opportunity set right now. Pricing dynamics have evolved, with high-quality assets now commanding tighter valuations. Prices for these assets have improved to the low- to mid-90s% of NAV in recent months, up from the 82% average in 2023. This pricing improvement has attracted more sellers to the market, including notable transactions from major pensions. While secondaries of all types are gaining momentum, these recent trends suggest that traditional LP-led transactions may remain the dominant deal type through 2024. Read the coverage of Partners Group update by Secondaries Investor: https://shorturl.at/kyLzD

How to finance a note acquisition... On a typical deal, and #institutional equity partner will expect there to be low to moderate leverage (50-70% LTC) in order to generate the levered #returns they are looking for. At the same time, institutional #equity is typically very risk averse, and looks for efficient interest rates (why use bridge when you could use agency financing?) and positive leverage. In recent months, we at Livi Kapital made a determined effort to network with sponsors with experience buying #notes. This was due to the serious interest from many family offices and private equity funds to get into the #space. (foreseeing the pain that would manifest itself in the market.) The challenge though is evident... Notes, particularly when they're distressed, do not produce #cashflow. They could be rapidly earning interest at a sky high default rate, but all of that simply accrues at gets added to the unpaid principal balance. So you may be thinking. Do the institutional investors still #expect leverage on note acquisitions? Or is that simply too risky a proposition for them? (After all, note on note financing could be incredibly expensive.) The answer is the #latter. When it comes to note purchases, we've found that many, if not most, are open to buying the notes all #cash. But at the same time, they are not willing to sacrifice on #returns. Therefore, when looking at a note deal, it is very important that the #UNLEVERED returns for the deal will be comparable or better to #LEVERED returns on a typical acquisition. That's at least what we've found speaking to many investors in the space... Would love to here from people who have extensive experience in the note space, especially if you differ with my assessment here. A. Yoni Miller Charlie Vasbinder Steven Kashanian Adam Hajibai Zach Murphy Trey Palmedo

How to get blacklisted by 8-figure LPs: (And how to get them to invest with you.) A multimillionaire I know has blacklisted 2 real estate companies he used to invest with. He abandoned both for the same reason: -> Late K-1s. This guy is like so many real estate LPs. He makes a good living with his business. He's not living off the income from his RE investments. He invests for depreciation and he invests for the long term. So when he invests with a company, he wants: -> Clarity. -> Organization. -> K-1s that come in on time. Year over year, 2 companies were late in sending their K-1s. As a result, he couldn't file his personal return. So he told me he’d never invest with them again. I’ve been working with multifamily operators long enough to see this story repeated. Yes, of course LPs care about returns. But these investors—especially the HNW ones—are being courted by a lot of operators. They get good deals put in front of them left, right, and center. But the operators they keep working with are the ones who make their lives easier. Take care of the little things. And the big things will take care of themselves. 𝙒𝙝𝙖𝙩 “𝙡𝙞𝙩𝙩𝙡𝙚 𝙩𝙝𝙞𝙣𝙜” 𝙝𝙖𝙨 𝙩𝙝𝙚 𝙗𝙞𝙜𝙜𝙚𝙨𝙩 𝙞𝙢𝙥𝙖𝙘𝙩 𝙤𝙣 𝙮𝙤𝙪𝙧 𝙗𝙪𝙨𝙞𝙣𝙚𝙨𝙨?

“I’m here to tell you everything is not going to be ok.” Scott Kleinman Co-President Apollo Global Management, Inc. 🍀 “Private equity firms didn’t take significant markdowns during the recent period of rapid rate hikes which means that “investors of all sorts are going to have swallow the lump moving through the system,” he said, referring to assets that private equity firms bought up until 2022.” “Funds are now holding on to these companies and will eventually have to refinance at higher rates.” “That means “fewer realizations and lower returns” are on the horizon in the industry, Kleinman said.” “A record $3.2 trillion was tied up in aging, closely held companies at the end of 2023, according to Preqin data. That’s a problem for private equity — which relies on the cycle of raising money to make acquisitions, exiting via a sale or IPO and then returning money to investors. Some are even looking at alternative exit strategies.” 🍀 No one books losses til they have to. Private equity is no different. And private equity is generally only audited annually, which means any third-party review of the prior year trails by about 6 months.” And, yes, always looking for ‘alternative exit strategies.” 🍀🍀🍀

🔍 Are you eager for cheap property deals? 🏠💰 But hold on! Smart investors know the real treasure lies in looking at the big picture. We'll show you why focusing on the final value is the real secret to success. Plus, get FREE access to our Investor Blueprint Guide for Overview on the BRRR Strategy. Don't miss out! Click the link to grab your FREE guide now: https://lnkd.in/e62_7C5b #PropertyTips #BigPicture #InvestorGuide #realestate #propertyinvestment #bmv #freeresources #propertyinvestor

I've been getting a lot of calls about how tough it is to raise capital. Should they sweep the leg? Check the pic What should I do? I’m dialing everyday I’m emailing everybody I’m texting clients in campaigns I’m on social media and I can’t raise money. Passive real estate investing is saturated, and investors are stuck in a "90s" stock market mindset. They're bombarded with deals but miss the real point: it’s not about the deal; it’s about the sponsor and their strategy. People get dazzled by numbers—8% pref, 37% IRR— but those are just figures with fancy imagery. The real focus? Choosing the right sponsor, not just the right deals….. As an LP in many deals myself, high to low risk, I've learned it's about asking the right questions: This works for me and our investors. 1. What deals are you an LP in? It's mind-blowing how many syndicates don’t invest as LPs in their own deals. They talk about passive wealth but don’t practice it ithemselves. And 2. Are you diverse or focused on one area? Markets and property types shift quarterly. Diversity is your shield. Diversification is key today. Don’t get seduced by flashy numbers. Ensure your investments are solid and managed by reputable sponsors with a clear game plan. Share if you liked this ♻️ Follow Adam Shapiro for more. Book a call 📞 https://lnkd.in/gEmWdBsa

Let's compare and contrast private deal opportunities versus public markets. 🤝 Private deals operate in inefficient markets. In other words, information travels slowly, and relationships and connections matter so much more than research, unlike the stock market. In the stock market, if a company is undervalued and research is published, the stock can move fast. Conversely, a company can be beaten up fairly quickly if bad information spreads. In private inefficient markets, great deals exist all the time. 🏆 The deal makers, shakers, operators, and fund managers with the networks and connections have a significant advantage. This advantage is very powerful because there can be deep buys—deals transacting at a price substantially below the market with motivated sellers. This is happening more and more in today's market, where commercial real estate has taken a beating. There are motivated sellers and situations where connected buyers can get phenomenal deals through private transactions, and non-marketed deals. These opportunities present phenomenal growth and return upside. 📈 They call it an asymmetric return profile, where the risk still exists, but it's substantially lower compared to the return potential. Now, of course, there's a big difference between public and private markets. One of the big differences is that private markets or private transactions are not liquid, while public ones are. It's a disadvantage of the private market, but the advantage is that with the right operator, sponsor, or fund manager, you can get phenomenal opportunities. They can secure the best deals versus the public markets. 💡 Additionally, you can achieve diversification with private fund managers. You can diversify across multiple transaction types—multifamily, storage, industrial. You can also do debt, equity, and spread investments around the country in different locations. It's all about the network and connections. 💭 Ultimately, the most important factor in the due diligence of private transactions is who you're investing with. Knowing the people you're investing with, getting to know, like, and trust them, and building confidence that they're capable, connected folks who will be good stewards of your money is one of the most important steps. And of course, deal-level due diligence comes next, which we'll discuss at another time.

Secondaries are the talk of the town in private markets. Both fundraising and deal volumes have been running ahead even as the wider private equity industry has been in a cool-down period. Buyouts Insider (https://lnkd.in/gYvURwWa) offers a number of key trends behind this recent success story. After a period of unfavorable pricing, 2023 saw a confident rebound in secondary pricing. According to Jefferies, pricing improved from 81% of NAV in 2022 to 85% in 2023, with buyout funds reaching 91%. This positive shift has encouraged more LPs to actively manage their portfolios through the secondaries market. And with secondaries buyer appetite continuing to grow, the bid-ask spread is narrowing further, prompting sellers. Secondly, even if the secondaries market faces capital constraints, recent innovations, and record-breaking fundraising efforts offer a silver lining. Secondaries funds raised nearly $100bn in 2023 and Lexington Partners closed the largest-ever secondaries fund earlier this year at $22.7bn. On top of that, the proportion of investors planning to commit capital to secondaries funds over the next 12 months reaches 59%, according to Private Equity International's LP Perspectives 2024 Study, up from 44% in 2020. This influx of capital, coupled with increasing interest from both established and new players, is crucial for meeting the market's needs. Overall, all lights are flashing green for 2024 to be a record-breaking year for secondaries as dry powder is swiftly replenished and sellers increasingly find demand for their assets that meets their expectations. #privateequity  #secondaries

ExchangeRight, a provider of Delaware statutory trust and non-traded real estate investment trust investment offerings, announced that all ExchangeRight offerings delivered uninterrupted monthly investor distributions meeting or exceeding projections throughout 2023. According to the firm, this extends a streak of never missing or reducing distribution payments for any offering since ExchangeRight's launch in 2012.   ExchangeRight Real Estate Mountain Dell Consulting Warren Thomas #AlternativeInvestments #Advisor #Adviser #Investment #Investing #Broker #BrokerDealer #Brokerage #FinancialAdvisor #FinancialServices #InvestmentAdvisor #ExchangeRight #DST #DelawareStatutoryTrust #REIT #RealEstateInvestmentTrust #CommercialRealEstate #CRE #1031Exchange

Buy-and-build continues to be one of private equity’s most popular strategies, but a sustained period of higher interest rates is making it a lot harder to drive returns. Generating a strong exit in this environment will require doubling down on a strategy to produce organic growth and better margins—or finding one fast. https://atbain.co/3PBTqPX