The fundraising market for private real estate funds targeting multi-family properties is almost exclusively focused on the US market, where apartment- and condominium-style living is increasing in popularity. Fundraising in the sector has seen steady growth since 2010, culminating in 47 vehicles closing in 2014 with an aggregate capital raise of $14.9bn. It should be noted that the majority of this capital is raised by diversified vehicles that have a preference for multi-family properties. In 2014, 28 diversified vehicles closed raising $10bn, while purely residential-focused funds targeting multi-family assets closed with $5bn across 19 funds.
The multi-family sector has seen a slow start to fundraising in 2015, with just five funds closing and an aggregate $400mn raised. However, with 84 multi-family vehicles currently in market targeting an aggregate capital raise of $26.7bn, the following months of 2015 could prove to be stronger in terms of fundraising for the sector. This was demonstrated in 2014: after a slow start to the year with $2.2bn raised in Q1, the following quarters averaged over $4bn each in capital raised.
Strategically, value added and opportunistic vehicles lead the way in multi-family fundraising, closing 88% of the $14.9bn raised in 2014. Twenty-three value added vehicles closed in 2014, raising a total of $7.7bn, while funds with an opportunistic strategy closed $5.4bn across 15 offerings. Two core-plus vehicles raised $1bn, and $800mn was raised across six debt-focused funds. This would suggest that there are significant opportunities for investment in ageing multi-family assets across the US, alongside compelling cases for development and redevelopment across the country.
The decline in homeownership rates in the US continues to fuel demand in the multi-family sector, and looks set to continue for the foreseeable future. Whether this demand is fulfilled by improving existing assets or creating new ones, institutional investors are seemingly keen to get on board by backing fund managers’ offerings taking advantage of this trend.