Office-Focused Private Equity Real Estate Fundraising

by Farhaz Miah

  • 05 Aug 2011
  • RE

At present, there are c 27 solely office-focused private real estate funds in market, seeking to raise an aggregate $10.9 billion. Nine of these funds have already held at least one interim close, raising an aggregate $1.5 billion towards their targets. Sixteen US-focused office funds are seeking to raise $6.6 billion, while 10 Europe-focused office funds are looking to raise $4.1 billion. A single Asia and Rest of World-focused office fund is looking to raise $0.2 billion.

Blumberg Strategic Asset Fund, managed by Blumberg Capital Partners, and Paramount Group Real Estate Fund VII, managed by Paramount Group, are the two largest office-focused real estate funds in market. These US-focused vehicles are seeking to raise $1 billion each. The former fund is a value added offering that will target prime office properties in the major US real estate markets. The latter fund is a core-plus vehicle that will focus on class-A properties located throughout New York, San Francisco and Washington D.C.

From 2005 to July 2011, 65 office-focused private real estate funds reached a final close, raising an aggregate $29.5 billion. In 2005, 14 such funds raised an aggregate $4 billion, with this increasing to 15 funds in 2006 raising an aggregate $7.1 billion. Although the number of office-focused funds declined to 12 in 2007, the amount of aggregate capital raised reached an all time high of $8.6 billion, aided by the $4 billion close of the US-focused value added office fund, Beacon Capital Strategic Partners V, which is managed by Beacon Capital Partners.

In the immediate aftermath of the financial crisis, there was a noticeable downward trend both in the number of office-focused funds closed and in the aggregate amount of capital these funds accumulated. In 2008, 11 funds raised $3.5 billion, with this sliding to five funds raising total commitments of $1.3 billion in 2009. Despite this, 2010 showed some signs of a pickup in office-focused fundraising activity, with seven funds closing raising a total of $4.8 billion; however the bulk of this came from the $2.5 billion close of Beacon Capital Strategic Partners VI. In 2011 to date, one fund has closed raising $0.2 billion; however this may yet still rise as the nine office-focused funds in market that have reached an interim close are targeting total commitments of $4.5 billion.

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