Fundraising for primarily residential-focused private real estate funds has decreased since its peak in 2013, when 74 funds held a final close for $16bn. In 2014, 49 funds closed for $15bn and so far this year, only 26 vehicles have reached a final close, raising $4.2bn. However, the outlook for residential-focused private real estate funds looks strong, with Preqin’s Real Estate Online service currently tracking 100 funds in market that are seeking $19bn in institutional capital commitments for this property type.
As the chart above shows, the majority of residential real estate vehicles in market target North American property, with 61 funds targeting $11bn in capital from institutional investors. There are currently more funds targeting residential real estate in Asia than are focused on Europe; 27 Asia-focused funds are targeting $5.3bn, with only six Europe-focused funds seeking $1.4bn.
In terms of strategy, higher risk value added vehicles and opportunistic vehicles represent 37% and 33% of primarily residential-focused private real estate funds in market respectively, much higher than lower risk core and core-plus vehicles which collectively represent 12%. Additionally, 12 residential-focused funds in market utilize debt as a primary strategy, including the second largest fund in market, Pretium Mortgage Credit Partners. The fund will seek to deliver attractive risk-adjusted returns to its investors by investing in opportunities within the US residential housing credit markets, primarily through purchases of pools consisting of non-performing, re-performing and sub-performing residential mortgage loans and residential real property.