The Highs and Lows of Private Real Estate Fundraising in 2014 – January 2015

by Forena Akthar

  • 23 Jan 2015
  • RE

A total of $98bn was secured by 193 private real estate funds globally in 2014, the highest annual total since 2008, when 325 vehicles raised $137.5bn. Opportunistic funds secured the most capital from investors in 2014, with 58 vehicles gathering $34.7bn, slightly lower than the $37.6bn garnered by 85 funds that reached a final close in 2013. However, it was the debt strategy that enjoyed its most successful fundraising year on record, attracting $21bn through 29 vehicles, significantly more than the amount raised in 2013, the next most successful year for debt funds, when 30 vehicles closed on $16bn. Although core-plus funds only secured $6.4bn from investors via 19 vehicles, this was the highest amount of capital raised for the strategy since 2008, when 31 vehicles closed on $8.6bn.

It was also a record-breaking year for Europe-focused fundraising, with the $37.7bn (€27.2bn) raised by funds targeting the region being the highest on record, notably higher than the $31.7bn (€23bn) raised in 2007, the next most successful fundraising year for the region. Debt funds played a crucial role in this, contributing $8bn (€5.9bn) towards the overall $37.7bn. These highs suggest that there is strong momentum in the fundraising market and the outlook for the year ahead is positive.

Capital raised for other regions represent some of the lows observed in 2014 real estate fundraising. North America-focused fundraising declined, with only $48bn raised by 116 vehicles, much lower than the $62.8bn secured by 162 funds that reached a final close in 2013. It was a slightly better story for Asia-focused funds, with 23 funds raising $10.5bn, which was only slightly lower than the $11.1bn gathered by 25 funds in 2013. Funds targeting locations outside North America, Europe and Asia raised only $1.8bn through 10 vehicles, which is the lowest amount raised for funds targeting these markets since 2004.

Blackstone Group raised the most capital for closed-end private real estate funds in 2014, securing $14.2bn via two vehicles, Blackstone Real Estate Partners Europe IV (€6.6bn), which was the largest fund to close in 2014, and Blackstone Real Estate Partners Asia ($5bn). The firm raised a further $1.7bn for its open-ended fund, Blackstone Property Partners, by the end of 2014.

Lone Star Funds garnered the second highest amount of capital in 2014 through the second largest fund to close in the year; Lone Star Fund IX closed on $7.2bn in July 2014 after only five months in market. Another firm that raised a substantial amount of capital through one vehicle is PIMCO, which attracted $5.5bn for PIMCO Bravo Fund II.

The average time spent in market by funds that reached a final close in 2014 was 18 months, with 31% of funds spending an average of two years or more in market. This highlights that despite the many triumphs in 2014, raising capital for real estate funds will remain extremely difficult in 2015 and fund managers will have to continue working hard to stand out from the crowd and secure investor capital.

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