Firms managing closed-end private real estate funds have a record USD254 billion in dry powder available, up 37 per cent from the USD185 billion in December 2014, and representing the highest amount on record.
According to Preqin, the increase in uncalled capital available to private real estate fund managers is a result of strong fundraising over the last two years. In Q2 2015, 47 real estate funds closed securing an aggregate USD26 billion, bringing the 2015 total so far to USD60 billion. This represents the second highest half year figures for private real estate fundraising since the financial crisis, after H2 2013 when USD64 billion was raised.
The majority of dry power is focused on North American real estate, with USD133 billion focused on the region, while in terms of strategy, opportunistic vehicles have the highest amount of capital available to invest globally at USD100 billion.
A total of 22 North America-focused funds raised a combined USD10.3 billion in Q2, while 11 European offerings raised USD12.8 billion. A total of USD2.5 billion was raised by Asia-focused funds and USD0.4 billion by funds investing across other regions.
The average time taken for private real estate funds to reach a final close in Q2 has risen to 21 months, up from 19 months for funds closed in 2014.
Some 62 per cent of funds reached or exceeded their target size in Q2 2015, compared to 60 per cent in 2014 and 55 per cent in 2013.
Lone Star Real Estate Fund IV was the largest fund to close in Q2 2015 after securing USD5.8 billion for global opportunities, making it the ninth largest real estate fund of all time.
There are currently 416 private real estate funds in market competing for institutional commitments, and are seeking a combined USD149 billion in capital.
“The level of uncalled capital available to real estate fund managers to invest has hit a quarter of a trillion dollars for the first time ever,” says Andrew Moylan (pictured), Head of Real Assets Products at Preqin. “This is a reflection of the strong fundraising environment, as institutional investor confidence in real estate continues to increase. However, with increasing valuations and intense competition, finding attractive opportunities to invest this capital in the coming quarters is likely to be a difficult prospect. Fund managers will have to work hard to find value in an increasingly crowded marketplace. Furthermore, there is a competitive fundraising market, with 416 funds currently being marketed. This will make raising capital a challenging prospect for many over the second half of the year.”
Source: Property Funds World