Core-Plus Private Equity Real Estate Fundraising

by Andrew Herman

  • 18 Mar 2011
  • RE

Core-Plus real estate funds invest in moderate risk real estate that provides moderate returns. Investments are predominantly core but with an emphasis on a modest value add approach. These funds typically focus on the main property types in both primary and secondary markets, investing in class A or lower quality buildings that require some form of enhancement. As a result, core-plus investments generally require between 30-55% leverage and some additional capital investment.

Fundraising for core-plus real estate funds peaked in 2007 when 34 funds raised $14.3 billion. The following year was also very successful in terms of core-plus fundraising, with 28 funds raising $9.4 billion. In 2009 the difficult fundraising environment led to just 10 funds closing, with commitments of $2.5 billion. There was a slight improvement in 2010, when nine funds closed, raising an aggregate $3.4 billion. The decline in 2009 and 2010 fundraising is not exclusive to core-plus vehicles and is indicative of the private real estate market as a whole, as fund managers have struggled to gain commitments from investors.

There are currently 77 core-plus real estate funds in market seeking to raise $29.3 billion. Of these 77 vehicles, 47% have a primary focus on investments Europe. North America-focused funds account for 38% of vehicles in market, while the remaining 15% of funds primarily target Asia and Rest of World markets. The largest core-plus fund in market is Aberdeen European Shopping Property Fund, which is seeking to raise €1.5 billion. The fund pursues active management in accordance with a lower risk core plus to value-added strategy.

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