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Private Real Estate Fundraising by New York City-Based Managers – February 2015

by Jack Jackson

  • 12 Feb 2015
  • RE

In the last few days Blackstone Group announced that it is expecting to hold a $10bn first close for its latest vehicle, Blackstone Real Estate Partners VIII (BREP VIII), in March this year. The global opportunistic fund has an equity target of $13bn though many believe it will exceed this equity goal; it was only brought to market in November 2014, making it set to secure 77% of its target in only five months. If the firm is successful in raising the $10bn for its first close, it will be the largest amount raised at an initial interim close by a private real estate fund. If BREP VIII exceeds its target by $500mn, Blackstone will beat the fundraising record it set back in 2012 when it closed Blackstone Real Estate Partners VII on $13.3bn, the largest real estate fund of all time.

In the last 10 years, Blackstone Group has raised more capital for closed-end private real estate funds than any other firm in the world, securing over $60bn from investors. Needless to say, it dominates the universe of firms based in New York City, where its global headquarters are located, as can be seen in the table below. It has raised over three times the amount of capital of its nearest competitors in New York City, Morgan Stanley Real Estate Investing and Goldman Sachs Merchant Banking Division, which have raised $19.3bn and $18.3bn through closed-end private real estate funds over the last 10 years respectively. 

When looking at annual fundraising by New York City-based firms, 2014 was a strong year for managers, with 25 funds holding a final close raising a total of $27.1bn, the highest since 2008 when $42.5bn was raised across 42 vehicles.

Opportunistic vehicles are the most prevalent among fund managers in New York City, with $18.5bn raised across nine such vehicles last year. This is largely due to Blackstone Group closing two opportunistic vehicles at a combined $11.6bn, cementing their dominance of the New York City fundraising landscape. Five debt vehicles raised by New York City-based managers collected commitments of $3.5bn in what was a record breaking year for the strategy. In terms of geographic focus, 19 private real estate vehicles raised in New York City are targeting North America, having raised $12.4bn; $9.5bn was raised by two Europe-focused funds and a further two vehicles raised $5.1bn to invest in Asia and markets based outside these three core regions.

There are currently 64 real estate funds in market managed by New York City-based managers, targeting $42.6bn. The vast majority of these vehicles will target the US (55 funds seeking an aggregate $37bn), with only nine focusing on Europe and Asia. Regarding strategies, $26.8bn is being sought by 22 opportunistic funds, $7bn by 21 value added vehicles and $6.2bn by 13 debt funds. The remaining $2.6bn is being sought by core-plus and distressed strategy funds. Westbrook Real Estate Fund X, targeting $2.5bn, is the second largest fund being marketed by New York City-based managers after BREP VIII, with Morgan Stanley Real Estate Investing’s MSREF VIII Global targeting $2bn.

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