Private Equity Real Estate Fundraising at Lowest Level Since 2003

by Andrew Moylan

  • 09 Oct 2009
  • RE

In Q3 2009, just 17 private equity real estate funds closed worldwide, raising $4.9 billion, the lowest fundraising total for a quarter since Q3 2003, when 17 funds raised $3.2 billion. The figures for Q3 also represent a significant fall from earlier in the year, equating to 48% of the total raised in Q2 2009. The decline from the same quarter in 2008, however, is even more dramatic: Q3 2009 fundraising represents just 12% of the $40.5 billion raised in Q3 2008.

The number and aggregate target of private equity real estate funds in market has been declining throughout 2009. The aggregate target of all funds in market has fallen by $21 billion over the course of Q3, as fund managers have reduced their fundraising targets in response to investor activity, or in some cases abandoned their fundraising efforts altogether. Preqin has identified 46 private equity real estate funds which have already been abandoned or put on hold in 2009 to date, compared with 27 in 2008.

Although the number of funds in market is falling, conditions remain extremely competitive. The aggregate target of all funds on the road represents significantly more than the total raised during 2008, the most successful year ever for private equity real estate fundraising. Investors remain extremely cautious in the current climate and many have seen the value of their existing real estate holdings decline significantly. Investors are either holding off from investing, or making commitments at a far slower rate and to fewer funds than they were during 2007 and 2008.

In 2009 to date, just 18% of fund managers have achieved or exceeded their fundraising target, with 82% of funds falling short of their equity goals. This provides further evidence of how difficult the fundraising environment is at present. In 2007, 79% of funds matched or exceeded their target size.

North American funds accounted for the largest proportion of capital raised during Q3 2009, with five funds raising an aggregate $1.9 billion. Seven funds targeting Asia and Rest of World closed receiving commitments of $1.5 billion and five Europe focused funds raised $1.4 billion.

Please click here for more information and statistics on private equity real estate fundraising in Q3 2009.

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