Empirical return on private equity investments in real estate funds at imperfect capital markets

Empirical analysis on the achieved returns of private equity funds for real estate are missing for decades in Germany. This paper intends to close this research gap by presenting four ways to quantify returns on private equity for the different reporting stakeholders based on investment appraisal methods for imperfect capital markets. This allows detailed profitability and risk analysis of liquidated and operating private equity funds for real estate without the assumptions of internal rates of return. The four-dimensional methodology is applied on 500 real estate funds existing since the introduction of disclosure standards, which creates for the first time an empirical analysis of profitability of these investment products at the German capital markets.