Investor Activity in Private Real Estate Funds in 2012

by Sarah Unsworth

  • 07 Mar 2012
  • RE

Preqin interviewed over 180 private real estate investors in order to determine how active they will be in the private real estate market in 2012. Institutions were asked to estimate the number of fund commitments they intend to make in 2012 and how much capital they are likely to invest. While many investors stated that they would invest on an opportunistic basis, or had yet to decide on a specific amount of capital or number of funds they would invest in, a larger proportion had made clear plans than when investors were surveyed a year ago. Thirty-five percent of investors surveyed that intend to invest in private real estate in 2012 believe they will invest in 1-2 funds. Twenty-one percent stated that they are likely to invest in 3-6 funds, while just 2% intend to invest in more than seven funds. Forty-two percent did not have a set number of funds in mind.

Though many investors had an idea of the number of funds they would invest in, more than half were unsure how much capital they would commit to these funds. Fifteen percent said they would commit up to $10mn, 15% stated a commitment level of $10-100mn, and 17% said it was likely they would commit more than $100mn to private funds in 2012.

In terms of how much capital investors expect to commit to private real estate funds in 2012 compared to the amount they committed in 2011, 26% percent said they would commit more capital to private real estate funds in 2012 than in 2011. However, 47% of investors surveyed didn’t commit to funds in 2011 and did not expect to commit to funds in 2012. Sixteen percent of investors would invest less capital in 2012 than in 2011 and 11% intend to commit the same amount of capital in 2012 as they did in 2011.

Investors were also asked how they preferred to be contacted by fund managers. Forty percent of investors stated that they preferred fund managers to e-mail fund documentation without a follow-up call, when marketing real estate funds. Thirty-nine percent indicated that fund managers should contact their investment consultants, highlighting how important these firms are as gate-keepers of institutional capital. 11% of investors prefer fund managers to e-mail fund documentation and then follow up with a phone call. Only 8% of investors said they preferred for fund managers to make an introductory phone call when marketing real estate funds and 2% stated that fund managers should complete a standardized form.

The study reveals a number of important issues affecting the private real estate market, with the low proportion of respondents stating that they will be actively investing in funds in 2012 highlighting the extent to which investor confidence has yet to return. While 36% of respondents indicated they were likely to commit to private real estate in 2012, the uncertain economic forecast has led many investors to take a cautious approach to investing. Nevertheless, the results of the survey suggest that fund managers look set to continue to struggle to raise equity in 2012, as investors remain cautious about investing in private real estate

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