viii. Risk, Time & Illiquidity

Real estate is characterized by long time horizons, high capital intensity, and limited liquidity. These structural traits introduce distinct forms of risk that affect pricing, financing, ownership, and decision-making throughout an asset’s lifecycle.

Capital Intensity

The requirement for significant upfront investment to acquire, develop, or operate real estate assets.

Cyclicality

The tendency of real estate markets to move through expansion, peak, contraction, and recovery phases.

Development Risk

Uncertainty associated with entitlements, construction, costs, and delivery timelines.

Holding Period Risk

Risk arising from extended ownership durations, including exposure to market and regulatory changes.

Illiquidity

The inability to quickly buy or sell an asset without materially affecting its price.

Interest Rate Risk

Exposure to changes in borrowing costs that affect asset values and cash flows.

Liquidity Premium

Additional return demanded by investors to compensate for limited liquidity.

Market Risk

Exposure to changes in supply, demand, and pricing conditions within a market.

Operational Risk

Risks associated with property management, maintenance, tenant performance, and execution.

Regulatory Risk

Uncertainty arising from changes in laws, zoning, taxes, or compliance requirements.

Reinvestment Risk

The risk that proceeds from a sale or refinancing cannot be reinvested at comparable returns.

Time Horizon

The expected duration over which an investment is held, influencing risk tolerance and strategy.

Transaction Friction

Costs and delays associated with buying, selling, or financing real estate, including legal, tax, and diligence requirements.