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Private Real Estate Debt Fundraising: A Breakdown – September 2015

by Philip Wedge

  • 22 Sep 2015
  • RE

Private real estate debt fundraising has had a great deal of success in the past few years, with sizeable year-on-year increases in aggregate capital raised since 2012. Fundraising in 2012 was particularly low: 28 debt vehicles raised $6bn collectively. However, there was a 183% increase in aggregate capital raised from 2012 to 2013, with a further increase to $24bn in 2014 – a record high for the strategy. The number of debt funds reaching a final close has fluctuated only slightly; 32 vehicles reached a final close in 2011 compared with 34 in 2014, suggesting that capital is becoming concentrated among fewer, often more experienced managers.

In terms of geography, the majority of capital committed to real estate debt funds was for North America-focused opportunities. However, so far in 2015, funds targeting Europe have raised more capital: six Europe-focused debt funds have raised an aggregate $5.2bn, compared with eight North America-focused debt vehicles raising $4.5bn in institutional capital commitments. As shown in the chart above, these two regions consistently dominate the fundraising landscape for debt vehicles, more so than for other private real estate strategies. Since 2013, 96% of aggregate capital raised for real estate debt funds targeted North America or Europe, a larger proportion than that for core, value added and opportunistic funds.

Preqin’s Real Estate Online service currently tracks 56 closed-end debt funds in market, targeting an aggregate $26bn. This remains consistent with the debt fundraising market one year ago: in September 2014, there were 57 primarily debt-focused funds seeking capital, aiming to secure an aggregate $25bn from investors. As discussed previously, capital has become concentrated among fewer managers seeking to raise larger funds, with six debt funds in market each seeking over $1bn in institutional capital commitments, representing 41% of the total capital targeted for real estate debt funds. The largest debt fund in market, AgFe Real Estate Senior Debt Floating Rate Fund, is targeting $2.6bn to originate commercial mortgages secured on UK commercial property; should it successfully reach its target, it will become the sixth largest real estate debt fund of all time.

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