Private Equity Real Estate Fundraising Declines in First Quarter

In a competitive market, fundraising for private equity real estate around the world declined in the first quarter of 2012, according to an analysis by Preqin, an alternative asset research firm.

Twenty-six closed-end private real estate funds that held final closings raised an aggregate of $9.5 billion in the first quarter, Preqin's data showed. That number is in contrast to the 39 funds that closed in the fourth quarter of 2011, which raised $15.8 billion.

Andrew Moylan, manager of real estate data for Preqin, said the market continues to be competitive, with 449 funds currently seeking a combined $166 billion. That amount represents more than three times the total capital raised in 2011, Moylan noted.

"While there have been firms achieving considerable fundraising success, there have been many others which have been forced to delay anticipated closings," he said. "Given the level of competition in the fundraising market, capital for private real estate funds looks set to remain challenging in the coming months."

However, he said the number of funds holding interim closes—in which the accounting records to determine the fund's position are closed prior to the fund's final closing—and aggregate capital raised by such funds suggest momentum is building in the fundraising market, because managers are able to raise enough capital to hold closes and start making investments.Twenty-seven private equity real estate funds held interim closes in the first quarter of 2012. Preqin data showed that they raised $7 billion towards their fundraising targets.

The funds that closed in the first quarter of 2012 also spent slightly more time in the market than those that closed in the fourth quarter of 2012. In the most recent quarter, funds that closed spent an average of 18.1 months in the market. In the previous quarter, funds that closed spent 17.3 months in the market.

Regionally, North American funds had the most success raising capital, Preqin found. Fifteen funds with a primary focus in North America raised a total of $6.3 billion. Seven European funds raised a total of $2 billion. Four funds that invest in Asia and the remaining regions around the world raised a total of $1.2 billion.