Private Equity Real Estate: Core-Plus Fund Managers

by Andrew Herman

  • 19 Mar 2010
  • RE

Core-plus funds provide investors with the opportunity to invest in moderate-risk real estate vehicles that provide moderate returns. These funds utilize a value added approach to some degree, but investments are predominantly core in nature. Like core vehicles, core-plus funds target Class A or lower properties that require some sort of enhancement such as repositioning. These vehicles typically use leverage of around 30-55% and provide a less risky alternative to value added and opportunistic funds.

The best year for core-plus fundraising was 2007, when 30 funds raised an aggregate $13bn. Fundraising in 2009 proved to be significantly less successful as only seven funds closed with an aggregate $2bn in commitments. The decline in fundraising in 2009 is not exclusive to core-plus vehicles, but is indicative of the whole private equity real estate fundraising market, which struggled to attract investor commitments during 2009.

There are currently 48 core-plus vehicles in market targeting an aggregate $18bn in equity. The primary geographic location for a high proportion of these funds is Europe, with 48% of core-plus funds focused on this region. North America-focused funds account for 44% of vehicles, with Asia and Rest of World-focused funds accounting for the remaining 8%.

Shorenstein Properties has raised the most capital for core-plus funds, having raised an aggregate $4.5bn over the past 10 years. The largest non-US manager is ING Real Estate Investment Management. The Dutch firm has raised $3.1bn for core-plus vehicles over the past 10 years. Crow Holdings is another significant core-plus manager, having raised $2.8bn for these funds over the previous decade.

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