Fundraising by private equity real estate firms for private real estate debt funds has seen a steep increase in recent years. From 2005 to 2008, a total of 108 real estate debt funds closed, raising an aggregate $59.7 billion in investor commitments. Just 14 debt funds closed in 2005, raising an aggregate $6.2 billion, compared to 42 vehicles raising a total of $30.7 billion in 2008. However, fundraising for real estate debt vehicles so far this year has dropped back to levels seen in 2005 and 2006, with only 19 funds closing with $10.1 billion in equity commitments. This has mainly been due to investors holding off on commitments to private real estate funds in general. Nonetheless, there are now more real estate debt funds on the road than ever before, which is not surprising considering the lack of financing from the banks to the industry as a result of the financial crisis. 101 real estate debt funds are currently seeking capital, targeting an aggregate $75.6 billion in investor capital. If managers are able to close fund with half of this total, then 2010 would be the most successful year for real estate debt funds. This will depend on investor activity and whether managers are forced to target less than what they initially intended, as many across the asset class have been doing.
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