Sumit Roy
President & Chief Executive Officer at Realty Income
Thank you, Jonathan. As we mentioned last year, a natural step in our evolution is to diversify and enlarge our access to equity capital through private markets. We see multiple strategic benefits of entering the private capital business. First, the amount of equity available from private sources far exceeds that, which is available through the public markets we have traditionally accessed. The size of the US private real estate market is approximately $18.8 trillion, 10 times larger than the $1.9 trillion of assets owned by public REITs. Thus, private capital controls more than 90% of the U.S. commercial real estate market based on research from the National Association of Real Estate Investment Trusts. Creation of a private capital investment platform is expected to provide us with access to a deep pool of institutional capital from investors who may otherwise lack the mandate or ability to invest in real estate securities. Second, access to the alternative source of equity with generally less pricing volatility will give us the opportunity to accelerate the monetization of the scalable and proven investment in operating platform we have built, in turn, supporting our ability to continue delivering value to shareholders.
Third, a powerful element of the fund management strategy is the incremental capital-light fee earnings it's anticipated to offer. Base management income earned by managing third-party capital represents a source of recurring and potentially high-growth revenue, which we observed as receiving a premium multiple from the investment community. The vast majority of fees earned would be recurring in nature and generated through open-end perpetual life funds rather than performance-based or transaction oriented fees. Fourth, the capability of our differentiated business model will allow us to advance this initiative with limited incremental investment while leveraging the collective talent and experience of our top-tier team and platform. We have a long history of underwriting, operating and maximizing the value of our real estate holdings, dating back to our founding in 1969. Leveraging that history, we have harnessed an impressive quantum of property level data to develop our proprietary predictive analytics model to support decision-making. With additional size and scale, these data-driven insights will become increasingly robust and accurate. Together with the expertise of our team, we believe we provide a compelling co-investing platform for investors.
Finally, we believe private capital will enable us to source, acquire and manage a large percentage of available market opportunities that we currently acquire for the public vehicle. Overall, our intent is to create and operate an evergreen open-end fund that will manage private capital on behalf of institutional investors, such as pension funds, sovereign wealth funds, endowments, foundations and large insurance companies.
To be clear, this structure will be distinct from a typical private equity style closed-end fund that may have a fixed duration or a narrower opportunity set. Importantly, this fund will be designated to target institutional investors. It will not be structured as a non-traded REIT, and we do not intend to market to high net worth or retail investors. Our fund business is expected to follow the same balance sheet and prudent leverage philosophy that Realty Income describes today. We do not anticipate an adverse impact on our balance sheet strength or credit ratings Rather, it will enhance our financial flexibility. Realty Income intends to be a meaningful co-investor in the fund while receiving management and potentially incentive fees generated by operation of the fund. These additional earnings would bolster Realty Income's return on investment while ensuring incentives between public and private investors are aligned. This approach also reinforces our commitment to transparency and shared objectives.
In summary, we believe this private capital platform will be complementary and additive to our existing business. We intend to take a thoughtful approach to allocating investment opportunities between realty income and the fund to maximize the returns for our public shareholders, benefiting both our shareholders and private investors. We expect this initiative to enhance our ability to grow our earnings and dividend, expand our addressable market for investments and reduce our reliance on public equity across market cycles when strategically advantageous. We look forward to sharing more information as we progress on launching the fund.
In closing, our year-to-date performance has exceeded our expectations, propelled by momentum on the investment front and supported by the stability of our portfolio, consisting of leading clients across the globe. Looking forward, I'm optimistic about the multiple verticals for growth we have cultivated for capital deployment. Importantly, pairing these growth verticals with alternative sources of capital will further accelerate the maturation of our platform.
I would now like to open it up for questions. Operator?