Twenty-eight closed-end private real estate funds reached a final close in Q1 2012, raising an aggregate $10.2bn from investors. This represents a decline on the $15.8bn raised by 39 funds in Q4 2011. Funds with a primary focus on North America raised the most capital in Q1; 16 such funds received aggregate commitments of $6.9bn. Eight Europe-focused funds raised $2.1bn, while four Asia and Rest of World-focused funds raised $1.2bn. In addition to funds holding final closes, 27 vehicles held interim closes in the quarter, raising $7.0bn towards their fundraising targets. Angelo, Gordon & Co raised the two largest funds to close in Q1, raising $1.27bn for AG Realty Fund VIII and $1.01bn for AG Core Plus Realty Fund III. Other notable closings included Related Companies raising $825mn for Related Real Estate Recovery Fund and GTIS Partners raising $810mn for GTIS Brazil Real Estate Fund II.
Funds closed in Q1 2012 spent an average of 18.1 months in market, an increase from the 17.3 months for funds closed in 2011 and a significant increase on the average of 8.7 months that funds closed in 2007 spent in market, highlighting the competitive and overcrowded nature of the current real estate fundraising market.
The first quarter of 2012 saw private real estate fundraising continue at the same level seen during much of 2011. The number and aggregate capital raised by funds holding interim closes does suggest that there is more momentum in the fundraising market, with managers raising sufficient capital to hold closes and begin making investments. The fundraising market remains extremely competitive; however, with almost 450 funds on the road, targeting a total of $166bn, the aggregate target of funds on the road represents more than three times the amount of capital raised in 2011.
While there have been firms achieving considerable fundraising success, there have been many others which have been forced to delay anticipated closings. Given the level of competition in the fundraising market, raising capital for private real estate funds looks set to remain challenging in the coming months.