The Rise of Opportunistic Real Estate – April 2014 (Part II)

by Olivia Harmsworth

  • 25 Apr 2014
  • RE

Opportunistic managers appear to be having more fundraising success, with the average amount of time they spend on the fundraising trail falling and many reaching or exceeding their target sizes. Opportunistic private real estate funds have had more success in recent years in reaching or exceeding their target size, with 64% of primarily opportunistic funds closed in 2013 doing so, compared to only 41% of funds closed in 2012. Additionally, a considerable 36% of opportunistic funds closed in 2013 achieved 125% or more of their target size, demonstrating the significant investor appetite for this strategy. One example of a primarily opportunistic fund closed in 2013 which significantly exceeded its target size is Starwood Distressed Opportunity Fund IX, managed by Starwood Capital Group; the fund reached 168% of its target size of $2.5bn, raising a significant $4.2bn in investor commitments. 

Furthermore, opportunistic funds closed in 2013 spent, on average, far less time on the road than other private real estate funds, taking an average of 16.5 months to reach a final close, compared to 21.5 months for all other funds. This is a reversal of the trend seen prior to 2012, with opportunistic funds closed in 2011 spending longer in market on average than other funds. 

As of March 2014, there are 138 primarily opportunistic private real estate funds on the road, targeting capital commitments of $49bn, an increase from the 117 such funds on the road in March 2013 targeting $47bn in investor capital. The increase in the number of opportunistic funds on the road demonstrates the confidence fund managers have in their ability to attract capital for this strategy. With investor appetite for opportunistic real estate growing, and fundraising improving for the strategy over the last year as a result, the outlook for opportunistic funds in market is particularly positive.

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