E317: Why Most Real Estate Investors Optimize the Wrong Return Metric

Mar 4, 2026

Andrew Berman, Co-founder and Managing Partner at Architelle who builds tax-aware private real estate strategies. He explores how taxes, manager incentives, and premature sales erode after-tax wealth. Short holds, depreciation recapture, 1031 tradeoffs, and family office approaches come up. The conversation centers on aligning structure with taxable investors to unlock durable structural alpha.

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ANECDOTE

Founding Architelle From AQR Tax Experience

Andrew Berman built Architelle after seeing AQR develop tax-aware public market strategies and noticing private markets lacked the same discipline.
He translated tax-focused public-market concepts into a private real estate firm dedicated to taxable clients.

INSIGHT

Taxes Create Structural Alpha In Private Real Estate

Taxes are a durable source of structural alpha in private real estate when investment strategy is married to the right tax structure.
Andrew Berman says tax-aware real estate can produce more than twice the after-tax net-of-fee return versus tax-agnostic approaches because taxes materially change long-term wealth creation.

ADVICE

Evaluate Real Estate Using After Tax Returns

Do evaluate private real estate on an after-tax basis rather than pre-tax because some pre-tax attractive strategies become unattractive after taxes.
Andrew Berman argues taxable investors are often underallocated to private real estate once after-tax returns and correlations are considered.

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What if the biggest untapped source of alpha isn’t better investments… but better tax structure? In this episode, I sit down with Andrew Berman, Co-Founder and Managing Partner of Arqitel, to explore the overlooked power of tax-aware private real estate investing. After starting his career at AQR Capital Management and working closely with one of its co-founders inside a family office, Andrew saw firsthand how tax-aware strategies transformed public market investing. He realized private markets had yet to fully adopt the same discipline. We break down structural alpha, why many private real estate managers are incentivized to sell too soon, and how taxable investors can materially improve long-term wealth creation by aligning investment strategy with tax structure. In increasingly efficient markets, tax may be one of the few durable advantages left.

Highlights:

Why most private real estate investors underestimate how much taxes impact long-term returns
How structural alpha can potentially exceed the dispersion between median and top quartile managers
Why five-year hold periods may quietly erode after-tax wealth
The mechanics of depreciation recapture and capital gains drag
How manager incentives often conflict with after-tax optimization
Why long-duration holds can enhance compounding for taxable investors
When 1031 exchanges make sense and when they may introduce hidden costs
Why taxable investors may be structurally under-allocated to private real estate
How family offices think differently about liquidity, control, and tax efficiency
Why after-tax return may become the defining metric for modern portfolio construction

Guest Bio:

Andrew Berman is the Co-Founder and Managing Partner of Arqitel. He previously began his career at AQR Capital Management and later worked within the family office of David Kabiller. His work focuses on maximizing after-tax returns for ultra-high-net-worth investors through tax-aware private real estate strategies.

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Sponsor:

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Disclaimer:

This podcast is for informational purposes only and does not constitute investment, financial, legal, or tax advice. Nothing in this episode should be interpreted as an offer to buy or sell any securities or to participate in any investment strategy. All opinions expressed by the host and guests are their own and do not represent the views of Weisburd Capital. Participants may hold positions or have financial interests in the companies, funds, or investments discussed. Any references to specific investments are for illustrative purposes only. Investing involves risk, including the potential loss of capital. Past performance is not indicative of future results, and any forward-looking statements are subject to risks and uncertainties. Any third-party data or opinions have not been independently verified. Listeners should conduct their own research and consult their own advisors before making any investment decisions.

(0:00) Why Real Estate Is the Most Tax-Advantaged Asset Class (1:22) The Hidden Returns Most Investors Leave on the Table (2:21) How Taxes Can Cut Your Real Estate Returns in Half (4:29) The Power of Depreciation and K-1 Pass-Throughs (5:28) Why Most Real Estate Funds Trigger Unnecessary Taxes (6:49) A Simple Example of 35% Tax Drag (9:08) The Truth About 1031 Exchanges (10:46) The Two Types of Family Office Investors (13:24) Why Tax Alpha Is the Next Big Investing Edge (14:47) Tax Strategy vs Picking Top Quartile Managers