Distressed Private Real Estate Fundraising

by Carla Henry

  • 20 Jan 2012
  • RE

There are currently 112 distressed private real estate funds in market, seeking to raise an aggregate of $36.9bn from investors. Of these funds, 39 have held at least one interim close since inception, raising a total of $16.9bn towards their respective targets. Only one fund has adopted a distressed only strategy, with the remainder employing a combination of distressed and other strategies. North America is the dominant region in terms of fund manager location, with nine of the ten largest distressed funds on the road being raised by firms based in the region.

Of these distressed funds currently on the road, nine are focusing on investments in Asia and Rest of World and are targeting an aggregate $4.1bn in commitments. The two largest Asia and Rest of World-focused funds currently in market are the $1bn Aetos Capital Asia IV Fund and Secured Capital Real Estate Partners V. Aetos Capital Asia IV Fund invests in distressed and opportunistic properties in China and Japan - in China the fund focuses primarily on for-sale residential development and retail in targeted second and third tier cities; however In Japan it targets primarily distressed real estate opportunities in the Tokyo market. Secured Capital Real Estate Partners V invests in a diversified range of properties, targeting distressed and debt opportunities mainly in Japan. 91 of these distressed funds are focused on investing in real estate in North America and are targeting an aggregate $28.1bn, while 12 are focused on investing in Europe and are seeking an aggregate $4.6bn from investors. The largest distressed vehicle targeting Europe is Blackstone Real Estate Special Situations Europe Fund, managed by Blackstone Group.  The fund has a target of $1bn and primarily invests in public and/or private debt and non-controlling equity interests relating to European real estate assets.

The two largest distressed vehicles currently on the road are Rockpoint Real Estate Fund IV and Starwood Distressed Opportunity Fund IX, with both looking to attract $2.5bn each in commitments. Rockpoint Real Estate Fund IV, managed by Rockpoint Group, adopts a distressed and opportunistic strategy and is targeting properties located throughout the US. Starwood Distressed Opportunity Fund IX, managed by Starwood Capital Group, is an opportunistic, distressed and debt fund and has held one interim close to date. Approximately 50% - 70% of the fund will be invested in the US, 15% - 30% in Europe and 10% - 20% in Brazil and India.

Since 2005, a total of 134 distressed private real estate funds have successfully closed, raising an aggregate $80.3bn. A large proportion of the distressed funds that closed since 2005 (73%) focus on North American investments, with 13% investing in Europe and the remaining 14% investing throughout Asia and Rest of World. Primarily North America-focused distressed real estate funds have raised the most capital, with 98 funds accumulating $52.8bn in commitments. Europe-focused funds have raised an aggregate $8.2bn, while Asia and Rest of World-focused funds that have closed since 2005 have raised a total of $11.9bn.


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