Listed and non-listed real estate investment - why combine the two?

Van Lanschot Kempen /

02-02-2018

At Kempen Capital Management N.V. (Kempen), our clients often ask us about the benefits of investing in real estate. In this white paper, we discuss some of the key considerations. Besides direct ownership of real estate, investors have the option of gaining exposure to the global real estate markets through listed and non-listed indirect real estate implementation vehicles. A frequently asked question is: are these different vehicles part of the same asset class? Or do listed and non-listed real estate in fact represent two different asset classes, each with its unique dynamics? What can be the benefits of combining listed and non-listed real estate investments in a portfolio? T

his white paper aims to provide answers to these questions. Based on academic literature and our own analysis, we conclude that both listed and non-listed real estate are exposed to the same common real estate factor. Both listed real estate companies and non-listed funds are vehicles for obtaining exposure to this factor. We focus on how listed and non-listed real estate are different vehicles for capturing the same exposure, on differences in liquidity, pricing mechanism, leverage, cost levels and underlying exposures. We subsequently examine the potential opportunities created by these different dynamics. Next, we discuss potential arbitrage opportunities and examine whether diversification between the two can be achieved. We conclude with some final remarks.