Historically, distressed and debt vehicles made up a relatively small proportion of the real estate fund universe, but following the financial downturn in recent years, they have gained popularity among fund managers. Preqin Investor Network’s database currently shows 157 real estate funds following a distressed and/or debt strategy, representing 33.8% of all real estate vehicles on the road.
One of the largest of these vehicles in market is Starwood Distressed Opportunity Fund IX, which is targeting between $2bn and $3bn. The fund targets both distressed and debt opportunities across the globe. Similarly, Rockpoint Real Estate Fund IV, which is seeking $2bn, expects to invest in distressed properties in the US and to a lesser extent in Europe and Asia.
Distressed and debt real estate funds also remain attractive to investors. The Preqin Investor Outlook: Real Estate - H2 2012 shows 22% of investors are planning to invest in distressed real estate funds and a further 5% in debt vehicles in the next 12 months. Core (46%), opportunistic (35%) and value added strategies (24%) continue to attract the most interest from investors that will be making fund commitments over the coming year.