Fundraising for Opportunistic Private Equity Real Estate Funds

by Helen Wilson

  • 19 Feb 2010
  • RE

Opportunistic vehicles are one of the higher-risk fund types and aim to provide higher returns, usually in the high-teens and above. Like value added vehicles, opportunistic funds typically target lower-quality buildings that require improvements and rehabilitation in order to increase their value. Opportunistic funds invest in a wide range of property types, including niche sectors, and are highly leveraged. Gearing of up to 70% can be used for these funds.

The best year for opportunistic fundraising was 2008, when 84 funds raised an aggregate $84bn. Fundraising in 2009 was considerably less successful however, with 59 opportunistic vehicles raising an aggregate $26bn. This significant decline in fundraising was not exclusive to opportunistic vehicles; private equity real estate funds of all strategies struggled to close in 2009, with 103 vehicles raising an aggregate $42bn over the year. Nonetheless it is worth noting that a considerable proportion (62%) of all capital raised in 2009 was by opportunistic funds, suggesting that opportunistic vehicles are well-suited to the current economic conditions. 73% of private equity real estate investors on Preqin’s database are interested in this type of fund. There are currently 182 opportunistic vehicles on the road targeting an aggregate $95bn.

A large proportion of the opportunistic funds on the road (45%) will invest primarily in North America, with 24% primarily targeting investment in Europe and 31% in Asia and Rest of World. North America is also the dominant region in terms of fund manager location, with nine of the ten largest private equity real estate managers by capital raised for opportunistic funds based in the region. The only fund manager based outside of this region is MGPA, a UK-based firm that has raised $7bn for its opportunistic funds in the last 10 years.

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