Private Equity Real Estate J-Curves by Vintage Year – July 2015

by Lisa Parker

  • 08 Jul 2015
  • RE

Preqin’s Real Estate Online service tracks performance returns for 1,350 closed-end private real estate funds globally, of which over 1,050 have a net IRR percentage. The median net IRR at each quarter-end for funds of vintages 2002-2011 can be observed in the J-curve below.

Private equity real estate IRRs are typically negative in the first few years of a fund’s life, increasing over time as investments are exited, and then stabilizing in the final years of the fund’s life. Illustrated above is the impact of the downturn on funds of 2005-2007 vintage years.  The median net IRRs of vintage 2007 funds experienced a significant decline beginning in June 2008, reaching a low of -41.8% in March 2009. However, the median IRR for funds of this vintage has since had a steady recovery, standing at 6% as of September 2014. Funds with vintages 2005 and 2006, which would have invested the majority of their capital at peak prices, have not seen the same level of recovery.

Funds with more recent vintages have significant levels of uncalled capital and the net IRRs are likely to change over time, suggesting that funds with later vintage years could still generate a higher median net IRR in the future.

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