August 3, 2015
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Investors seeking to increase their private equity real estate allocations may be considering Walton Street Real Estate Fund VIII, the newest flagship fund sponsored by Walton Street Capital.

But the manager’s history points to this as the riskiest part of the real estate cycle to invest with Walton Street Capital. Many investors and consultants believe this to be the late stage of the real estate cycle – the very stage in the past at which Walton Street’s management has been particularly troubled.

Key points:

  • Through 2008, Walton Street deployed 38% of investor equity in investments that have failed or lost money.
  • Walton Street’s write-off ratio was reportedly higher than peers at 1Q2012; in the time since, the manager has lost more investments with significant equity commitments.
  • Walton Street’s managing principals have failed multiple times in the late stages of the real estate cycle while earning high fees, including the spectacular early-90’s collapses at their prior firm, JMB Realty.
  • Walton Street’s history of lost properties and failed investments demonstrates poor discipline in late stages of the real estate cycle, such as we may be entering into now. Many of the worst failures involved high leverage, poorly timed or ill-executed strategies, and/or high purchase prices.
  • JMB Realty, the predecessor to Walton Street, faced its own spectacular collapses in the run-up to the early-90s real estate cycle peak. Poor discipline was similarly exhibited at JMB – with notable comparison to Walton Street’s worst excess as the bubble popped mid-2007.
  • Many investors and consultants believe this to be the late stage of the cycle – the very stage in the past at which Walton Street’s management has been particularly troubled.

Questions to Consider