Brokers are doing their job well. In an environment where deals fall through off rising rates, which I assume means they were too sensitive to debt anyway, properties are trading at cap rates where even with aggressive leverage, they will likely deliver sub 15% IRRs, and sub 8% coc returns after fees, if you’re following a traditional PE model.

The only way I realistically see these metrics being surpassed is if rent growth rises yoy, with little investment into a property, so basically buying a product and expecting it to rise in value without changing it. Which is fine, but I fail to see how so many ‘PE’ groups continue to place capital.

The idea behind a PE investment is that the group’s expertise will be used to create an asset that will be able to deliver returns superior to those of traditional public equity and alternative markets.

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