IREI: Why liquidity and vehicle structure matter more than ever in private markets
The biggest private markets risk today isn’t credit, it’s liquidity. Vehicle structure, governance and duration alignment are becoming critical drivers of outcomes.
Tax-Efficient Investing Strategies for Real Estate and Alternative Investors
Tax efficiency is often discussed as a year-end planning exercise. In reality, it is an important component of investment performance.
In a recent episode of Peachtree Point of View, experts from Peachtree Group, Madison SPECS and Higginbotham explored how tax-efficient structures can help investors improve after-tax outcomes, keep more capital invested and support long-term wealth creation.
What Is Tax-Efficient Investing?
Tax-efficient investing is the practice of structuring investments in ways that legally reduce, defer, or eliminate certain tax obligations.
The goal is not necessarily to avoid taxes altogether. Instead, tax-efficient investing seeks to maximize the amount of capital that remains invested and compounding over time.
Common strategies include:
- Cost segregation studies
- Bonus depreciation
- 1031 exchanges
- Delaware Statutory Trusts (DSTs)
- Qualified Opportunity Zones (QOZs)
- Roth IRA conversion strategies
- Private Placement Life Insurance (PPLI)
What Is Cost Segregation and Bonus Depreciation?
Cost segregation is a tax strategy that identifies building components that can be depreciated faster than the standard 39-year schedule used for commercial real estate.
Bonus depreciation allows eligible components to be deducted immediately rather than over multiple decades.
For investors, this can generate substantial upfront tax deductions while preserving capital for reinvestment.
The primary benefit is timing. Investors accelerate deductions today while potentially deferring tax obligations into the future.
What Is a 1031 Exchange?
A 1031 exchange allows an investor to sell investment real estate and reinvest the proceeds into another qualifying property while deferring capital gains taxes and depreciation recapture.
Benefits include:
- Preserving capital for reinvestment
- Deferring capital gains taxes
- Deferring depreciation recapture
- Supporting long-term portfolio growth
Many investors use multiple 1031 exchanges throughout their lifetime to continue compounding wealth.
What Is a Delaware Statutory Trust (DST)?
A Delaware Statutory Trust is a structure that allows investors to own fractional interests in institutional-quality real estate while qualifying for 1031 exchange treatment.
DSTs are often used by investors seeking:
- Passive ownership
- Diversification
- Tax deferral
- Access to larger institutional assets
They can be particularly attractive for investors transitioning from active property management to passive investing.
What Are Qualified Opportunity Zones?
Qualified Opportunity Zones were created to encourage investment in designated communities.
Investors can generally reinvest eligible gains into Opportunity Zone projects and receive tax benefits, including potential tax-free appreciation after long holding periods.
Opportunity Zones can be funded with gains generated from:
- Stocks
- Businesses
- Real estate
- Artwork
- Other appreciated assets
What Is Private Placement Life Insurance (PPLI)?
Private Placement Life Insurance is a specialized insurance structure used primarily by accredited and ultra-high-net-worth investors.
PPLI allows investments to grow within a tax-advantaged insurance wrapper.
Potential benefits include:
- Tax-deferred growth
- Tax-free access to gains when structured properly
- Estate planning advantages
- Improved long-term compounding
For investors with long-term horizons, reducing tax drag can have a significant impact on cumulative wealth.
This article is provided for informational purposes only and should not be construed as tax, legal, or investment advice. Investors should consult their tax, legal, and financial advisors regarding their individual circumstances before implementing any investment or tax strategy.
Three Key Takeaways
1. Tax efficiency is a return enhancer.
The underlying investment still matters most, but tax efficiency can materially improve after-tax outcomes.
2. Deferral creates value.
Many strategies focus on extending the life of invested capital rather than permanently eliminating taxes.
3. Structure matters.
The greatest benefits often come from combining multiple strategies within a disciplined investment plan.
Frequently Asked Questions
Why does tax efficiency matter so much to long-term investors?
Tax efficiency is an important component of investment performance. Preserving more capital for reinvestment can enhance compounding over time and contribute meaningfully to long-term wealth creation.
Is tax-efficient investing only for real estate investors?
No. While many of the strategies discussed are commonly associated with real estate, tax-aware investing extends across multiple asset classes. Certain approaches, such as Opportunity Zones and private placement life insurance, can apply to gains generated from a variety of investments.
Do tax benefits make a bad investment a good one?
No. Investment quality should always come first. Tax efficiency can enhance after-tax outcomes, but it cannot compensate for poor underwriting, weak execution, or a flawed investment thesis.
What is the difference between tax deferral and tax elimination?
Tax deferral postpones taxes into the future, allowing capital to remain invested and continue compounding. Tax elimination permanently removes certain tax liabilities under specific circumstances. Both can improve after-tax outcomes, but they operate in different ways.
Are these strategies suitable for every investor?
No. The suitability of any tax strategy depends on an investor's financial circumstances, objectives, tax situation, time horizon, and risk tolerance. Investors should consult qualified tax and legal advisors before implementing any strategy.
Listen to the Full Conversation
To hear the full discussion with Greg Friedman, Isaac Weinberger, Ari Lasky, Tim Witt, and Dan Bergan, listen to the latest episode of Peachtree Point of View.
Peachtree Group Earns Multiple Honors at Hilton Awards
Peachtree Group announced it was recognized with five honors at Hilton’s 2025 Americas Development Awards, including Multi-Brand Developer of the Year, underscoring the strength of the firm’s hospitality development platform and longstanding partnership with Hilton. The annual awards recognize outstanding owners, development partners and hotel teams across the Americas for excellence in development, innovation and hospitality.
Peachtree Group Principal Mitul Patel was named Multi-Brand Developer of the Year, recognizing leadership across Hilton’s portfolio and the firm's continued expansion of high-quality hospitality assets throughout the United States.
In addition to the platform award, Peachtree Group and its development partners received recognition across multiple categories:
- Focused Service U.S. Developer of the Year – Hampton Inn & Suites Maui North Shore developed by Peachtree Group and Blackridge Group
- All Suites U.S. Developer of the Year – Embassy Suites by Hilton Gulf Shores Beach Resort developed by Peachtree Group and Woodbine Hospitality Group
- Curio Collection by Hilton New Build Award – The Ava Hotel Paso Robles, Curio Collection by Hilton developed by Peachtree Group and Paso Robles Hotel Partners, LLC
- Hilton Garden Inn Conversion Award – Hilton Garden Inn North Phoenix Scottsdale developed by Peachtree Group
“These recognitions reflect the strength of our development platform and the partnerships that make these projects possible,” Patel said. “We have built our platform around identifying compelling markets, executing complex developments and delivering hotels that create long-term value for guests, communities and investment partners. We are honored to be recognized by Hilton alongside our development partners.”
Peachtree Group has partnered with leading hospitality brands for nearly two decades, and today maintains a hotel development portfolio and pipeline exceeding $2 billion nationwide, spanning urban infill developments, destination resorts, lifestyle properties and select-service hotels. The firm’s vertically integrated platform supports development, lending, acquisitions, asset management and hotel operations.
“These awards reflect the strength of our investment, development, asset management and operations teams and their ability to identify markets and projects we believe can create long-term value,” said Greg Friedman, managing principal and CEO, Peachtree Group. “We have built an outstanding development platform, and our teams help drive performance well beyond opening day. We remain bullish on hospitality, particularly newer, premium-branded hotels, as limited new supply and strong long-term demand trends continue to support many of the markets where we invest, including future developments such as our dual-branded Embassy Suites and Tempo by Hilton project in downtown Austin.”
Hilton selected winners from hotels opened during 2025 across the Americas, recognizing achievements in development excellence, design innovation, brand growth and community impact. Hilton added more than 400 hotels across the region during the year, with 59 projects and development partners receiving awards.
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2026 Market Insights
Peachtree Group's leadership team is actively shaping the conversation across commercial real estate and private credit, providing perspective on a market defined by capital constraints, refinancing pressure and emerging opportunity.
What changes do you expect to see in the commercial real estate market in 2026?
Greg Friedman | Managing Principal & CEO
“It’s an inflection point… you’re going to start seeing assets trade… it’s not an issue with the fundamentals at the asset level, it’s more of an issue of broken balance sheets.”
What has been the key to the firm’s ability to succeed across different market cycles?
Jatin Desai | Managing Principal & CFO
“We’ve had to be very agile to pivot through all these various things… that’s what’s helped us find good opportunities by not being so set in being just a developer, operator or owner… and pivoting and finding the right partner really made a difference for us to do what we wanted to do, but also grow beyond that.”
How does Peachtree Group approach capital structuring for complex historic redevelopment projects?
Jared Schlosser | Head of Credit Originations and Commercial PACE
“Projects like this require thoughtful structuring given the complexity of historic redevelopment and construction completion… that complexity is exactly why sponsors seek lending partners with the experience and balance sheet to structure capital solutions and help move projects forward.”
How are deferred capital expenditures impacting the hotel sector today?
Michael Ritz | EVP Investments
“That capex doesn’t go away… brands need reinvestment to protect guest experience. But many owners simply can’t fund it.”
What does it take to successfully develop hotels in today’s market environment?
Will Woodworth | SVP, Investments
“Developing hotels in today’s environment requires both conviction and capability… our vertically integrated platform and access to capital allow us to partner with best-in-class brands to deliver properties on-time and on-budget that will elevate the markets in which we build.”
What are borrowers looking for in lending partners today?
Daniel Siegel | President and Principal CRE, Credit
“With banks pulling back and refinancing risk rising across the market, demand for experienced private lenders has accelerated… borrowers are not just looking for capital. They are looking for partners who understand assets, cash flow and downside risk.”
How is EB-5 financing supporting development projects?
Adam Greene | EVP, EB-5
“In this case and in many cases where Peachtree implements EB-5, having that funding source from these foreign investors allows us to give developers a slightly better deal than they might otherwise get from traditional sources… it’s a really worthy development tool.”
Grind to ’29: Opportunity in CRE’s Capital Reset
Over the last three years, commercial real estate has gone through the painful part of the cycle. Values reset, transactions slowed, lenders pulled back and many owners shifted from growth to defense. That was Survive to ’25. Now the market has moved into something different, or what we refer to as Grind to ’29.
This next phase will not be driven by falling rates. It will be an extended period in which outcomes are shaped by capital stack adjustments, underwriting discipline and the ability to move when others cannot.
The economic backdrop is stable but fragile. Headline data still appears durable, yet growth is increasingly uneven. A narrow set of AI-driven investments has carried much of the expansion, while broader private investment is slowing. At the same time, policy uncertainty has become a headwind in its own right.
For us, rates matter most at the long end of the curve. We are focused on the 10-year Treasury as the anchor for cap rates and permanent capital. Even in our current range-bound 10-year, while higher, it is still constructive, as it provides some stability. Even if the Fed eases modestly on the short end, underwriting will need to stand on fundamentals rather than multiple expansion.
That is why our strategy is centered on credit and special situations. At three-plus-trillion-dollar wall of maturities is colliding with a challenging refinancing market. Regional banks, historically a primary source of commercial real estate lending, are prioritizing their balance sheet over new originations.
The result is a meaningful gap in the capital markets. While lending spreads have compressed modestly in favored sectors such as multifamily and industrial, the gap between sectors remains wide, reinforcing the importance of selectivity and disciplined structure.
We are originating loans that banks would have written in prior cycles, but at a stronger basis following the valuation reset. At the same time, an increasing number of institutions are choosing to sell loans rather than extend them or push borrowers into refinancing. That shift is expanding activity in the secondary market as banks seek liquidity. The combination of selective originations and discounted loan purchases broadens our entry points rather than narrows them.
The prolonged period of “extend and pretend” did not resolve leverage risk. It deferred it. Today, there is a growing inventory of assets with capital structures that no longer reflect current rates or values. Many properties are operationally sound yet over-levered, and partnerships are feeling pressure as maturities approach without straight forward refinancing solutions.
We believe 2026 will be an inflection year for many commercial real estate owners. Decisions that were postponed must now be made. Owners will transact, contribute significant new equity, accept higher-cost capital through preferred equity or structured senior debt, or, in some cases, return assets to lenders.
The process is unlikely to be orderly. It is likely to be complex and uneven. For disciplined capital providers, that complexity creates attractive entry points. In this part of the cycle, it is less about broken real estate and more about broken capital stacks. That is where dislocation lives.
The common thread across everything we are doing is consistent. We prioritize basis, maintain disciplined structure and build in downside protection. The next leg of commercial real estate will reward patience, execution and the ability to provide solutions rather than predictions.
That is what Grind to ’29 means for us as we steadily build value while others wait.
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