Preqin’s most recent quarterly fundraising data shows that 39 closed-end private real estate funds raised a total $18.2bn in Q2 2014, compared to the aggregate $25bn secured by 68 funds in Q2 2013 and the aggregate $13bn from 58 vehicles in Q2 2012. The latest fundraising figures are slightly below those of the previous quarter, Q1 2014, when 40 funds garnered $24.5bn in aggregate commitments.
Of the aggregate capital raised by closed-end private real estate funds in Q2 2014, $10.2bn (or 56% of aggregate commitments), was raised by vehicles primarily focused on North America, followed by $6.2bn (or 34% of aggregate commitments) by funds targeting Europe. Nine percent of global aggregate capital raised in Q2 2014 was garnered by vehicles focused on Asia, and the remaining 1% was raised by funds seeking investments in countries outside of these three core regions.
Breaking down Q2 2014 global fundraising by primary strategy reveals that the majority of capital commitments were secured by debt, value added and opportunistic funds. Debt vehicles garnered the most capital, with a total $7.5bn raised by seven funds, followed by 18 vehicles utilizing value added strategies attracting an aggregate $6bn in equity. Eleven opportunistic funds raised a total of $3bn in Q2 and lower-risk core and core-plus vehicles attracted the least amount of equity, with one core fund securing $300mn and two core-plus funds raising $1.4bn in total.
On average, closed-end private real estate funds are taking longer to achieve a final close. The vehicles that closed in H1 2014 spent, on average, 18.4 months fundraising, an increase from the average 17.1 months spent on the road by funds that closed in 2013 and significantly longer that the average of 16.5 months spent fundraising by funds that closed in 2011.
Despite being on the fundraising trail for longer, a higher proportion of closed-end private real estate funds are meeting or exceeding their equity targets than in the past. Sixty-one percent of funds that reached a final close in H1 2014 garnered 100% or more of their target, compared to 46% of funds that closed in 2012 achieving the same feat. The proportion of funds significantly exceeding their targets is also increasing, with 22% of funds that closed in H1 2014 raising 125% or more of their target capital raise, compared to 20% in 2013 and 10% in 2012.
Kildare European Partners I was the largest fund to reach final close in Q2 2014; the fund raised $2bn in aggregate capital for its primarily debt-focused strategy, which it will deploy in Western Europe. Broad Street Real Estate Credit Partners II garnered $1.8bn in equity from investors for its US and Europe-focused debt strategy.