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Changes in the Net Asset Value of Private Real Estate – October 2015

by Lisa Parker

  • 09 Oct 2015
  • RE

Preqin’s Real Estate Online service contains performance data for over 1,350 closed-end private real estate funds. Using this data, Preqin is able to analyze the average change in net asset value (NAV), which can provide insight into the performance of the private real estate market. As the chart below shows, Q4 2014 saw the highest quarterly change in NAV (4.4%) in weighted terms since Q4 2013, and the second highest quarterly change for the non-weighted measure (4.4%) since Q2 2014. The weighted metric takes fund sizes into consideration; this allows larger funds to have greater impact and provides a more realistic reflection of the real estate industry as a whole. Both the weighted and the non-weighted measures had equal changes in NAV for Q4 2014, suggesting that fund size had no impact during this period.

Since Q1 2013, the quarterly change in NAV of private real estate funds has remained relatively steady. In weighted terms, it has ranged between 1.1% and 5.5%, and in non-weighted terms between 1.3% and 4.5%. This is in stark contrast with the volatile changes in NAV figures for previous years (2007-2012), when unrealized values for real estate vehicles experienced extreme reductions and subsequent strong recoveries. For non-weighted changes in NAV, the range was between -15.7% and 7.3%, and for weighted it was between -18.8% and 12.2%.

With private real estate dry powder and unrealized values continuing to increase each quarter, it is clear the asset class is performing strongly. It will be interesting to see over the coming quarters whether the trend of larger funds outperforming their smaller counterparts will continue.

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