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US-Focused Closed-End Private Real Estate Funds: Median and Weighted Net Multiples by Vintage Year

by Emma Underwood

  • 27 Nov 2014
  • RE

Preqin’s Real Estate Online service features individual net-to-investor performance metrics for over 1,250 closed-end private real estate funds. One such metric is the net multiple, which enables investors to assess how much they have gained, or are likely to gain, from a fund investment in relation to their net contribution to the fund. While it does not take into account the timings of capital call-ups and distributions, it remains a useful indicator of fund performance.

The chart above highlights the median net multiple and weighted net multiple, of which the latter takes into account the size of each fund, for US-focused private real estate funds of vintage years 1995 to 2013. The median and weighted multiples exceeded 1.3 times investors’ paid-in capital for all vintages 1995 - 2003. Vintage year 2004 to 2008 funds have much lower multiples, attributable to the tough economic environment at the time these funds entered the investment period. Currently, 2005 and 2006 vintage funds have median and weighted multiples less than 1.0 times investors’ paid-in capital.

Although the median and weighted net multiples generally follow the same trend, there are certain vintage years when one significantly outperforms the other. For example, the weighted net multiple for 2011 vintage funds (1.36x) is greater than the median net multiple for the same vintage year (1.26x). Conversely, vintage year 2008 and 2009 funds have a higher median net multiple than weighted net multiple, suggesting that larger funds are underperforming in comparison to smaller vehicles for funds of this vintage.

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