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Private Real Estate Funds: Time on the Road – September 2013

by Jonathan Ma

  • 13 Sep 2013
  • RE

Preqin’s Real Estate Online shows that fundraising has become extremely tough for real estate fund managers over the last few years, as demonstrated by the time private real estate funds have spent on the road before reaching a final close. In 2011, 37% of funds that closed spent less than a year on the road, while in 2012, 20% of funds spent less than a year on the road. This number has fallen yet again for funds that closed between January and August 2013, when only 18% of funds were able to close in under a year.

The data on funds that closed between January and August 2013 shows that 31% of funds spent 18-23 months on the road. This was followed by 28% of funds spending more than 24 months or more on the road. Funds that spent 12-17 months on the road made up 22% of all funds that closed in this period and the remaining 18% of funds spent less than a year on the road.

The fundraising statistics for closed-end private real estate funds currently on the road also depict what looks to be a difficult fundraising environment. Twenty-six percent of funds that are yet to hold an interim close have been on the road for less than six months, while 24% have spent six to 11 months on the road. The remaining 50% of funds yet to hold an interim close have spent over a year on the road, with 18% of funds spending between 12-17 months on the road, 15% of funds spending 18-23 months and 17% spending over two years on the road.

With regards to funds that have held at least one interim close, 37% of funds have been on the road for over 24 months, 21% have spent 18-23 months on the road, 17% have spent 12-17 months on the road and 19% have spent six to 11 months on the road. Only 5% of funds that held at least one interim close have spent less than six months on the road.

While the pace of real estate fundraising has slowed since 2011, the levels of funding are encouraging. Although the proportion of funds hitting their target has fallen from 15% in 2011 to 10% between January and August 2013, the percentage of funds that have achieved or surpassed their target has increased to 53% in 2013 from 49% in 2011.

Upon examining the data regarding the size of a fund’s first close relative to its target, 41% of funds raised 20-39% of their target in their first close. This was followed by 20% of funds raising an encouraging 60-79% of their target at their first close. Seventeen percent raised between 0% and 19%, and 14% raised 40-59% of their targets. Funds that raised between 80% and 99% of their target made up 5% of the sample, while the remaining 3% of funds raised 100% or more of their target at their first close. 

 

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