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Financial concept that represents the excess return investors expect from an equity investment (like stocks or real estate equity) over a “risk-free” rate (typically the yield on government bonds). It quantifies how much additional return an investor demands, above a safe benchmark, to compensate for the higher risk of equities. In the public stock market, for example, if long-term Treasurys yield ~3% and investors expect stocks to return ~8%, the equity risk premium is ~5%. In real estate, the idea is analogous: a core real estate equity investment might be expected to deliver returns several percentage points higher than Treasury bonds or secured real estate debt, due to factors like illiquidity, operational risk, and market fluctuations. Notably, within real estate, equity positions sit below debt in the capital stack, so they carry more risk and thus should earn a higher return – a form of equity risk premium. High-net-worth investors consider ERP when allocating assets: they seek out private real estate opportunities that offer attractive risk-adjusted returns relative to safer investments. Lightstone’s strategy explicitly focuses on delivering market-leading risk-adjusted returns to investors, which essentially means offering a compelling equity risk premium. By co-investing its own capital and keeping fees transparent, Lightstone effectively boosts investors’ share of returns. This alignment ensures that investors are compensated for the risks of real estate equity, fulfilling the brand’s promise of institutional-quality rigor in opportunity selection and structuring.
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