Private Equity Real Estate Fundraising Reaches Highest Quarterly Total Since Q3 2008 – January 2013

by Andrew Moylan

  • 09 Jan 2013
  • RE

Twenty-eight closed-end real estate funds held final closes in Q4 2012, raising an aggregate $22.6bn. This is a significant increase on the $10.7bn raised in Q3 2012, though much of this increase can be attributed to the final close of the $13.3bn Blackstone Real Estate Partners VII during the quarter. There were also a number of other significant fund closes, with Westbrook Partners raising $1.6bn for Westbrook Real Estate Fund IX, Fortress Investment Group raising ¥130bn for Fortress Japan Opportunity Fund II, and CBRE Global Investors raising $1.1bn for CBRE Strategic Partners US Value 6. Funds with a primary focus on North America raised the most capital in Q4 2012, with 12 funds targeting the region raising an aggregate $17.9bn in capital commitments. Ten Europe-focused funds raised $1.8bn and two Asia-focused funds also raised $1.8bn; three funds investing elsewhere raised $1.0bn. In addition to funds holding final closes, 35 funds held interim closes in Q4 2012, raising $4.7bn towards their fundraising targets. Funds that closed in 2012 spent an average of 17.5 months in market, an increase from the average of 16.8 months taken to fundraise by funds closed in 2011 and a significant increase on the average of 9.0 months that funds closed in 2007 spent in market. There are currently 451 funds in market targeting an aggregate $148bn. While the number and aggregate target of funds in market fell during Q4 2012, the fundraising market remains crowded and very competitive.

2012 was another challenging year for private real estate fundraising, with $54.4bn raised by funds that closed during the year. While there were some notable fundraising successes, including the final close of the largest ever closed-end real estate fund, it remained difficult to raise capital. Fundraising is also an increasingly long process, with funds closing in 2012 spending an average of almost 18 months in market. There are some encouraging signs for 2013, with 53% of investors planning to make new commitments in the coming year, up from 36% in January 2012. Despite this increase in investor appetite, it is likely that there will not be enough capital available for all 451 funds on the road to raise their target amounts of capital successfully, and it will remain extremely difficult for those managers seeking to raise real estate funds in 2013 to stand out from the crowd.

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