Monday 28 September 2020

Growing Involvement Of Private Equity In Real Estate

In Economics land is considered to be the fountainhead of wealth. In other words land is the most important asset, because it is limited, it does not depreciate with time and it is the only commodity whose valuation continuously increases. Thus, investing in real estate is considered to be lucrative because of the assured dividends. Although private equity management firms primarily invest in companies, corporates, small and medium business, yet market observers have noticed a growing trend amongst equity management firms to invest in real estate. Usually, investing in real estate means a huge sum to be paid in advance, but usually, this investment can be easily realized post the wait period.

Anthony Munk, Senior Managing Director of ONEX Corporation opines that equity management firms cannot afford to show losses to stakeholders.  The primary objective of such firms is to ensure profit with proper asset management. Hence, there is a growing interest amongst private equity management firms to invest in real estate as it is one investment wherein returns are assured.

Anthony Munk has honed his skills as a business consultant and strategist since childhood! As the son or Pete Munk the founder of Barrick Gold Corporation, Anthony had been closely associated with different types of business activities and basics or asset or resource management. He went on to acquire a Bachelor’s degree in Economics from the prestigious Queen’s College. After that he pursued a stellar career as an analyst, going on to become vice president and finally, associating himself with many companies as a member of their board.

According to Munk some of the reasons behind the growing interest of private equity management firms in real estate are as follows:

  • Investing in real estate or property assures stakeholders of high returns on their capital investment, since land will always be sold at a profit.
  • The rate of interest or the dividend earned by investing in real estate is higher than in any other form of investment. Thus, the stakeholders can be assured of excellent returns on their investment.
  • Munk makes another observation that there is an increase in the amount of disposable in the hands of public. Thus, most people want to purchase a house, property or real estate. In such a scenario the demand for real estate will increase, thereby making it an excellent investment proposition.
  • Real estate cannot lie idle. Even if it takes time to realise the investment, the dividends are assured.

Thus, according to Munk, the assurance of good returns investing real estate is gradually gathering traction amongst equity management firms.

Anthony Munk, himself being the Senior Managing Director of ONEX have often advised his clients to invest in real estate. Many a times he has been instrumental in acquiring real estate firms and contractors. This has ensured stakeholders of ONEX to gain confidence in the functioning of the company as an equity manager. Hence, to ensure better results Munk believes that there should be increased investment in real estate.

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