Private real estate debt fundraising has had an increasing rate of success over the past five years, with sizeable year-on-year increases in aggregate capital raised since 2012. Fundraising in 2012 was particularly low – 34 debt vehicles raised $6.2bn collectively – but there was a significant increase in aggregate capital raised from 2012 to 2013. A record high was also seen in 2017, with 56 real estate debt funds closing on an aggregate $29bn in capital. However, much like the rest of the real estate universe, the capital raised by debt funds is becoming concentrated among fewer, more experienced managers.
As seen in the chart below, the number of funds closed and aggregate capital raised so far in 2018 are not on track to meet the high levels of the previous year. Goldman Sachs Merchant Banking Division has contributed the majority of capital raised by private real estate debt funds so far in 2018, with its Broad Street Real Estate Credit Partners III fund achieving $4.2bn at final close in January 2018.
The majority of capital committed to real estate debt funds in 2018 was for North America-focused opportunities, with Europe not far behind . When comparing the two regions over 2017 and 2018 respectively, however, the trend in proportion appears to have tilted even further in favour of North America-focused opportunities in 2018. In 2017, the capital raised by Europe-focused funds ($9.1bn) was around half that of the capital raised by North America-focused funds ($19bn), whereas so far in 2018, Europe-focused funds have raised just over a third ($1.5bn) of the capital secured by debt funds targeting North America ($5.4bn).
Preqin’s online platform tracks 112 private real estate debt funds in market as at May 2018, which are targeting an aggregate $45bn. This is a notable increase from one year ago, when 90 funds were aiming to raise $34bn, suggesting a substantial uptick in interest and appetite for the real estate strategy among investors. As discussed, capital is becoming more and more concentrated among fewer managers, and this is reflected in the market right now – seven of the 112 funds are targeting over $1bn in commitments. The largest real estate debt fund in market is TCI Real Estate Partners Fund III, which is being raised by TCI Real Estate Partners with a target of £3bn.