Dwight Stephenson, principal, Blue Vista; Bakari Adams, managing director, Starwood Capital Group; Gina Baker Chambers, president, MCB Real Estate; Chris Aiken, head of acquisitions for MetLife Investment Management’s real estate group; moderator Faron A. Hill, president, Peregrine Oak, speaking at the 2025 ULI Spring Meeting in Denver.
Lining up equity is the most important part of the capital stack, and it is especially tough for small and mid-size groups with capital that often flows to larger, more established platforms.
During the “Capital Markets: Raising Equity Today” discussion at ULI’s 2025 Spring Meeting in Denver, Colorado, a panel of industry experts and capital providers—moderated by Faron A. Hill, president of Peregrine Oak—shared their insights with a standing-room-only crowd on what they’re looking for in an equity partner—and what makes them walk away from deals.
A common theme heard throughout the industry is that plenty of “dry powder” remains available for commercial real estate. Much of that equity has been sitting on the sidelines, though, given the rise in interest rates and repricing of risk over the past two years. At the start of 2025, there appeared to be pent-up demand, with capital that was about to get back into the commercial real estate market.
“We’ve gone through the last two and a half years or so with very low transaction activity, and what I was hearing from a lot of my peers is [that] they were eager to deploy capital,” says Chris Aiken, head of acquisitions for the MetLife Investment Management Real Estate group. Even during the first quarter, it felt as if a lot of that capital was ready to engage, he adds.
The April 2 “Liberation Day” announcement on tariffs put a damper on some of that enthusiasm, however. “What we have now is a situation where the capital is looking to deploy, but for various reasons, largely tied to macroeconomic views, there is greater uncertainty in the market around where to deploy and ultimately what pricing should be to account for the risk in the market,” Aiken says.
Emerging managers face bigger challenges
In the current environment, investors are more likely to lean into their existing equity partners and relationships rather than take risks on new relationships or emerging managers. “It’s very difficult, if you’re not an incumbent, to attract new capital at this point, whether it’s for fund capital or even [joint venture] deal equity,” says Gina Baker Chambers, president of MCB Real Estate, an institutional investment management firm based in the Mid-Atlantic region.
The big fund managers continue to attract the majority of equity investment. The historical average shows that only about 11 percent of private equity raised has been allocated to first-time funds, and in the more challenging fundraising environment of the last five years, that share has shrunk to 4 percent, Chambers notes. “Going the [joint venture] equity route [will probably] be more successful, because it’s just very difficult to break into the fund business at this . . . time.”
Historically, emerging managers have faced significant challenges in raising capital, due to their limited track record, small operation scale, and lack of access to traditional networks. Another ongoing challenge to fundraising over the past couple of years has been lower levels of redemptions, which has meant less capital returned that can be deployed into new funds.
Investors are selectively deploying capital
When it comes to deploying equity, most equity investors are being selective, and there is no rush to get capital out. “Some of that is a function of [our not having] raised as much capital as we had intended, but also, there’s a lot of uncertainty in underwriting,” says Dwight Stephenson, a principal at Blue Vista Capital Management, a Chicago-based private equity firm. “What is our exit cap rate going to be, and does that align with the market?”
Given uncertainty around input costs, such as steel, aluminum, and even labor, it is difficult to underwrite construction costs on new development, as well as on value-add projects that require renovation and improvements. “Not knowing and adding in additional contingencies have definitely raised the bar on returns that we need to hit . . . to make a deal make sense and make our investors comfortable,” Aiken says.
That uncertainty is shifting equity away from development projects, generally. Although cost increases haven’t trickled through yet, an expectation endures that new policies on tariffs and immigration will result in higher construction costs.
Panelists agreed that investors are looking to partner with sponsors on a variety of asset types, such as in-fill industrial distribution, data centers, retail, and all types of housing. Investors also are looking at infrastructure and nontraditional property types, such as land that is on the grid or has access to power that can be used to support data center expansion.
Vetting sponsors and projects
Some institutions have targeted equity strategies to help emerging managers and small and middle-market real estate companies grow. For example, Starwood created its Starwood Strategic Partners platform to provide early- to mid-stage companies support and capital. Starwood has an application process and typically underwrites the company first, then the individual deal that the company brings.
“We look for . . . institutionally minded, great investors—not a deal junkie,” says Bakari Adams, a managing director at Starwood Capital Group and head of Starwood Strategic Partners. With specific regard to Starwood Strategic Partners, the firm wants to work with groups that have a scalable business plan, as well as an ability to be collaborative. “We’ve all worked with [joint venture] partnerships where the group we worked with wasn’t as collaborative, and it just doesn’t make [for] a great experience,” Adams says.
In addition to doing deals with middle-market companies, Blue Vista also has its emerging manager impact–oriented Blue Vista Accelerator Fund. The fund provides limited partnership capital to pre-emerging operators. In that strategy, the fund typically writes checks of $1 million to $5 million, with a focus on value-add and value-add light acquisitions.
Equity investors typically try to work with sponsors and general partners that have a good track record—particularly in the strategy and asset type being considered. And having a past deal that went sideways isn’t necessarily a nonstarter. Certainly, there are times, such as with the Global Financial Crisis or Covid, when problems occur. Stephenson says, “We want to . . . understand, what were the circumstances, what decisions were made, and what were the outcomes?”
Blue Vista spends a lot of time getting to know operators. In most cases, the deals that Blue Vista ends up funding come from operators that the firm has been talking to for at least a year—in some cases for as long as five years. “It’s really just a matter of finding the right first deal, but in some cases, it’s transaction led,” Stephenson says. In those cases, the firm is doing diligence on both the sponsor and the transaction at the same time.
How to avoid missteps
Panelists also offered advice on things not to do that can cause an equity partner to walk away from a deal. In some cases, the biggest deal killer is simply an unavoidable shift in market or economic factors that change the financials of a deal. One of the biggest missteps a sponsor can make, however, is to misrepresent themselves or their credentials.
Be transparent up front, Chambers advises. “Whatever it is, come to us early,” she says. “We can have a conversation about it. But if it’s something we discover on the back end, it does speak to your character.”
In some cases, investors may walk away from a deal if they think a sponsor or general partner is taking on more than they can handle. For example, having a strategic, focused strategy is more attractive to institutional capital than being an early-stage company that is trying to take on a national strategy that the business might not have the resources to execute well. It’s also important for the sponsor to own or have control of the land in a development opportunity.
“We want to make certain there’s an alignment between the risk that the [general partner] or sponsor is taking and, ultimately, what they’re bringing to the table,” Aiken says. For example, MetLife looks at the co-investment dollars a partner is bringing to the deal, relative to the fees they’re taking out. Numerous deals have failed to gain approval from the investment committee because the sponsor was extracting fees that were equivalent to—or greater than—their co-investment in the deal. “We are not going to do a deal where our sponsor, our partner, has zero basis in the deal before the value has been created,” Aiken notes.
At the end of the day, equity wants to partner with groups to create a strong likelihood of success. “Someone being very clear, being able to communicate, being very honest: Those are all characteristics that, to us, increase the odds of a transaction being successful,” Stephenson says. “Volatility happens. Things happen. You want to make sure you’re with a partner that generally makes good decisions and will act in the best interest not only of themselves but also for all the investment partners, as well.”
