Real Estate Forum - May 2008

The existence of publicly-traded real estate investment trusts (REITs) and the proliferation of commingled real estate investment funds has made investing in institutional-quality real estate increasingly mainstream and available to a wider class of investors. Fund sponsors in particular, through the use of creative structuring, have been able to access a diverse array of capital sources and have given real estate a prominent seat at the capital markets table.

To attract capital from investors as diverse as governmental and corporate pension plans, U.S. and overseas insurance companies, university endowments, private foundations, and sovereign wealth funds acting on behalf of foreign governments, fund sponsors typically use a variety of structures including “blocker entities” and private REITs to marry their capital with their investment strategy by accounting for investors’ tax and regulatory requirements. While the goal is to attract the greatest amount of capital into their funds, the tradeoffs sponsors face are less flexibility, greater complexity, and increased costs when actually making investments.

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Christopher Price is a partner in the New York office of Goodwin Procter and can be reached at (212) 813-8951 or cbprice@goodwinprocter.com.

Rishi Sehgal is an associate in the New York office of Goodwin Procter and can be reached at (212) 813-8849 or rsehgal@goodwinprocter.com.

Blocker Entities and REITS

Fund sponsors often use corporate blocker entities to change the character of

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