Fundraising for Western Europe-focused real estate funds took its time recovering from the global financial crisis, with fewer funds in market targeting less capital and increased investor scrutiny. However, 2014 figures suggest that the landscape has changed, with levels of capital raised surpassing even pre-financial crisis levels.
Across 30 vehicles, €17.3bn was raised by funds targeting Western Europe in 2014, dwarfing the €13.5bn raised by Western European funds closed in 2006, and the €12.4bn raised in 2007. Much of this is due to the rise of real estate debt and distressed vehicles in the region, with Lone Star Fund IX closing on $7.2bn (€5.4bn), and Kildare European Partners I netting $2bn (€1.5bn). Even without these vehicles closing, 2014 would still have exceeded the levels seen in 2013. Opportunistic vehicles raised €2.4bn across seven vehicles with another €1.4bn raised by four value added vehicles, hinting that traditional private equity real estate strategies may be falling out of favour in this region.
Preqin’s Real Estate Online shows that there are currently 56 Western Europe-focused funds in market, targeting an aggregate of €22.9bn in capital commitments. The vast majority of these vehicles are country specific, with 41 funds targeting €13.9bn. This is in contrast to funds closed in 2014, when €12.5bn was raised by regional funds against just €4.8bn for country-specific vehicles.
Western Europe-focused value added and opportunistic vehicles could be set for a better fundraising year in 2015, with 14 and 10 funds in market targeting €4.6bn and €6.9bn respectively. However, the majority of this targeted capital can be attributed to Lone Star Real Estate Fund IV; the opportunistic vehicle is targeting $5bn (€4.2bn) and will invest 70-80% of its capital in Western European real estate. Debt funds are looking for €6.5bn through 11 vehicles in an attempt to capitalize on the strategy’s successful 2014 fundraising effort.