The number of private equity real estate deals completed globally declined slightly in Q3 2016: 808 deals were completed, compared with 904 deals in Q2. However, aggregate deal value increased for a second consecutive quarter to $72.6bn, the second largest amount in a quarter since the beginning of 2014. As a result, the deals that are taking place are often larger transactions, with deals worth $100mn or more making up 29% of the overall number of transactions, the largest proportion since 2014.
The quarter saw the largest deal involving a private equity real estate fund manager in 2016 so far, with Anbang Insurance Group paying $6.5bn to acquire Strategic Hotels & Resorts – a portfolio of 15 hotel & resort properties – from Blackstone Group. The largest single-asset deal was for Fashion Show Mall, a shopping mall in Las Vegas, Nevada, which TIAA Asset Management acquired from General Growth Properties for $1.25bn.
Deal activity in Q3 was relatively consistent with activity earlier in 2016 in terms of asset type, with office and residential deals together making up over half (51%) of the total number of deals in Q3. However, the proportion of capital allocated to mixed-use and residential properties has declined from Q2, while the proportion allocated to retail, industrial and hotel deals has increased.
Despite representing just 22% of the overall number of transactions, properties at least 500,000ft2 in size accounted for 62% of aggregate deal value, up from 49% in Q2. A larger proportion of overall capital was also allocated to portfolio deals in Q3 2016 than in recent quarters: these deals accounted for 41% of aggregate deal value, up from 23% in Q2.