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Private Real Estate Fundraising Sees Large Gains in Fourth Quarter

01/04/2013 | By Carisa Chappell

Private Real Estate Fundraising Sees Large Gains in Fourth Quarter

Fundraising in the fourth quarter of 2012 for private real estate investment reached its highest point in four years, according to the latest data released by alternative assets research firm Preqin.

The firm noted that 27 private real estate funds held final closes in the fourth quarter of 2012, raising an aggregate $22.6 billion. That more than doubled the $10.6 billion raised in the previous quarter.

"This is the most successful quarter for private real estate fundraising since the third quarter of 2008 when $42.9 billion was raised," said Andrew Moylan, Preqin's manager of real estate data.

Moylan attributed much of the increase to the final close of the $13.3 billion Blackstone Real Estate Partners VII transaction during the quarter. He did point out that, overall, 2012 was another challenging year for private real estate fundraising. By the end of the year, a total of $54.4 billion was raised, a slight decrease from the $56.3 billion that was raised in 2011. Moylan said the final figure for 2012 is likely to exceed 201l once more information becomes available.

"While there were some notable fundraising successes, including the final close of the largest ever closed-end real estate fund, it remained difficult to raise capital," he said.

Looking ahead Moylan said there are encouraging signs for 2013, with 53 percent of investors having reported that they plan to make new commitments in the coming year. That is up from 36 percent in January 2012.

While investor appetite appears to have increased, he said a crowded and competitive market continues to present challenges for fundraisers. Currently there are 451 funds in the market targeting an aggregate of $148 billion.

"There will still not be enough capital available for all 451 funds on the road to raise their target amounts of capital successfully," he said. "It will remain extremely difficult for those managers seeking to raise real estate funds in 2013 to stand out from the crowd."

Funds are also taking longer to close, according to Moylan. Funds that closed in 2012 spent an average of 17.5 months in the market, an increase from the average of 16.8 months needed to close funds in 2011. He pointed out that funds spent an average of nine months on the market in 2007.

Funds with a primary focus on North America continued to raise the most capital in the fourth quarter of 2012. Twelve funds dedicated to North America received aggregate commitments of $17.9 billion, while 10 Europe-focused funds and two Asia-focused funds raised $1.8 billion each.

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