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2008 fundraising overshadowed by records of 2007

Just $57bn was raised in value-added and opportunistic real estate vehicles in 2008 compared to $85bn in 2007. Asia, however, has become the investment destination of choice overtaking strategies focused on North and Latin America.

The continued fallout of the credit crunch and the global financial meltdown has contributed to a slowdown in fundraising for private equity real estate during 2008 – with just $57 billion raised in value-added and opportunistic vehicles in the past 12 months.

This compares to the record-breaking levels seen in 2007 of $85 billion and $60 billion in 2006.

According to proprietary data from PERE magazine, however, more Asia-dedicated real estate funds closed in 2008 than for any other geographic strategy.

In the year to 25 November, 2008, the latest available data, 28 percent of all funds closed were targeting Asia and the rest of the world, a total of $16.2 billion. That compares to just 19 percent, in the year to November 2007, when Asia-specific funds closed totalled just $9.6 billion.

Private equity real estate firms including MGPA, LaSalle Investment Management and Merrill Lynch were among the biggest fundraises of the year – with MGPA raising the largest Asia-focused real estate vehicle ever, MPGA Asia III, on $3.9 billion. LaSalle raised $3.2 billion for its LaSalle Asia Opportunity Fund III and Merrill Lynch raised $2.7 billion for its first Asia-dedicated fund, the Merrill Lynch Asia Real Estate Opportunity Fund.

According to the data, private equity real estate funds still in market were targeting a further $31.3 billion of capital for Asia and rest of world strategies – twice as much as the year prior – and 23 percent of the total amount of equity being sought by the value-added and opportunistic real estate industry.

North and Latin America strategies dominated the funds in market data, with 34 percent of all capital currently being sought, a total of $44.5 billion, focused on the two regions. That compares with $14.6 billion actually closed during the year to November 2008, just 26 percent of the total cash raised by private equity real estate value-added and opportunistic funds.

European fund strategies were targeting $20 billion of capital from limited partners, according to the data, compared to $12.4 billion in capital closed by firms during 2008. Global strategies were chasing $37.7 billion in capital commitments to 25 November, 2008, against $13.4 billion closed in the same period.

For a full list of private equity real estate funds closed and funds in market/coming to market for the year to 25 November 2008, please see the latest edition of PERE magazine.