2009 saw a significant decline in private equity real estate fundraising, with the aggregate capital raised equating to just 31% of that raised in 2008. In total, 103 funds reached a final close with aggregate commitments of $42bn. Investor inactivity in 2009 resulted in fund managers delaying final closes, reducing targets and in many cases abandoning fundraising altogether.
$16bn was raised in Q1 2009, around half the amount raised in Q1 2008. Q2 saw $11billion raised, while the third and fourth quarters of 2009 were even worse, with just $7bn raised in Q3 and $8bn in Q4.
The proportion of fund managers that meet, exceed or fall below their respective fundraising targets is a good indicator of investor appetite for private equity real estate. 80% of funds that closed during 2009 did so below their original target, highlighting how tough the fundraising environment was. Almost a quarter of funds raised less than half their original target and only 10% of funds exceeded their target. In contrast, the 2007 market was extremely buoyant, with 79% of funds meeting or exceeding their fundraising targets and 26% of funds closing with more than 120% of the capital originally targeted.
Funds with a primary focus on North America raised $22bn in 2009, equating to 53% of the total capital raised worldwide. 26 funds primarily focused on Europe raised a total of $13bn, while 22 funds primarily focused on Asia and Rest of World reached a final close having received aggregate equity commitments of $6bn. Although fundraising fell across the entire market in 2009, the fall was particularly notable for Asia and Rest of World funds, which accounted for 15% of the aggregate total in 2009, compared with 27% in 2008. It is important to note, however, that many of the largest funds with a primary focus on North America also make investments on a global basis.
Opportunistic investments are the most commonly targeted type of investment by private equity real estate funds that closed in 2009. 45% of the capital that was raised in 2009 is primarily focused on opportunistic investments and 29% of capital was raised by funds primarily targeting value added opportunities. 19% is focused on real estate debt investments, while 4% is targeting distressed opportunities. Many opportunistic funds are also likely to target distressed investments.
Please click here to view Preqin’s latest press release on 2009 private equity real estate fundraising.