Twenty-six closed-end private real estate funds held final closes in Q3 2012, raising an aggregate $9bn. This represents a small increase on the $8.3bn which was raised in Q3, but is lower than the $11.9bn raised in the first quarter of 2012 and the $16.7bn raised in Q4 2011. Preqin anticipates the latest quarterly figures improving slightly (10-20%) as more information becomes available. In addition to funds holding final closes, 43 held interim closes in the quarter, raising $7.2bn towards their fundraising targets.
Funds with a primary focus on North America raised the most capital; 12 such funds received aggregate capital commitments of $4.2bn. Five Europe-focused funds raised $2bn, six Asia-focused funds raised $2.5bn and three funds investing elsewhere raised $0.3bn. Notable funds to close in the quarter included Patron Capital raising €880mn for Patron Capital Fund IV, while CapitaLand raised $1bn for CapitaMalls China Development Fund III and Carmel Partners raised $820mn for Carmel Partners Investment Fund IV.
Funds closing in 2012 to date spent an average of 18.2 months in market, an increase from the average of 17.2 months taken to fundraise by funds closed in 2011 and a significant increase on the average of 9.5 months that funds closed in 2007 spent in market.
For private real estate fund managers looking to raise capital, the fundraising market remains very challenging. While Q3 2012 did see a small increase in the level of fundraising compared with Q2, the total raised is well below the $13.1bn raised in Q3 2011. Funds that have closed in 2012 to date have spent an average of 18.2 months fundraising, highlighting how difficult it is for managers to raise capital. With a record number of funds on the road, it is also increasingly difficult for managers to stand out from the crowd. Preqin’s latest conversations with institutional investors have found that just 42% of investors in private real estate funds are planning to make new commitments in the next 12 months, suggesting that fundraising will remain challenging in Q4 and into 2013.