The Real Estate Fundraising Market - Q2 2012

by Carla Henry

  • 13 Jul 2012
  • RE

In Q2 2012, 27 closed-end private real estate funds reached a final close, raising $7.5bn in capital from investors. Despite the number of these funds reaching a final close in Q2 2012 remaining similar to Q1, the aggregate capital raised decreased slightly from the $10.8bn raised in Q1 2012. The amount of capital raised was considerably lower than the same period in 2011, when 31 private real estate funds closed on an aggregate $13.1bn in commitments from investors. One of the largest funds to reach a final close in Q2 2012 was Niam Nordic V, which raised €719mn to invest in commercial and residential assets throughout the Nordic Region.

Funds closed in Q2 2012 spent more time on the road compared to previous years, demonstrating the competitive and overcrowded nature of the current real estate fundraising market. Funds that closed in H1 2012 spent an average of 19 months in market, a small increase from the 17 months for funds closed in 2011, and a significant increase from the average of 11.4 months for funds closed in 2008. Funds closed in 2009 and 2010 spent an average of 16.6 months and 15.6 months in market respectively. The significant increase in time spent on the road in 2012 suggests that fundraising conditions remain extremely challenging, with fund managers finding it increasingly difficult to secure capital in the challenging economic environment.

The average length of time for a private real estate fund to reach a final close provides insight both into the current conditions of the real estate fundraising market and investor appetite towards the real estate asset class. Of funds on the road that closed in H1 2012, 11% did so having spent between 1-6 months in market, with 19% achieving a final close within seven to ten months. Twenty-seven percent of funds reached a final close after spending 19-24 months on the road, 13% spent 25-30 months in market, and 11% of funds spent 31 months or more on the road.

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