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Adapting to survive
01 June 2008
Private equity firms are quick to spot investment opportunities and to adapt to changing markets. With the end of the leveraged buyout market, distressed assets in the real estate sector are offering interesting investment opportunities, writes James Norris
Charles Darwin famously said the great survivors are not the strongest, but those best able to adapt to changing circumstances. Amid all the gloom and doom affecting the private equity sector, private equity firms have revised their business models and, chameleon-like, have turned their attention to distressed assets, wherever they may be found. They have lost interest in the race to clinch the biggest ever leveraged buyout deal, and instead targeted real estate.
For private equity firms, investing in real estate can be in the form of funds investing in physical property or in the form of debt sitting on the books of banks in the process of writing down multi-billion dollar losses. The idea behind investing in physical property is that it tracks real inflation and provides a regular and stable cash flow. As for distressed debt, says Stephen Schwarzman, head of Blackstone, history shows that good returns have...
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