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The UK and South African bank is raising capital from investors to acquire real estate assets on a deal-by-deal basis.

However, investor preferences and strategies have been changing as the country’s negative interest rate era comes to an end.

With support from some of India’s biggest domestic investors, the exit from Embassy REIT generated a 3x to 3.5x return for Blackstone.

Most assets need an additional 15-20% in reserves to address refinancing issues, according to the advisory firm’s co-founder.

Although 38% of investors were overallocated to the asset class in 2023, only 27% plan to invest less capital this year.

The outlook for 2024 stands in stark contrast to 2023 as institutional appetite for real estate picks up, says James Jacobs, head of real assets for Lazard’s private capital advisory group.

Investors are hurting from the poor performance of real estate, but this has not diminished their appetite for fresh investments.

The total of $138.93bn raised in 2023 represented a 41% drop from the $236.04bn raised in the 2021 fundraising peak.

The Ares-RXR venture comes at a time when transaction activity in the city has started to tick upward and capital is starting to move.

The new platform is intended to help mitigate miscommunication issues that led to unintended forced sales of properties.