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$300bn sat 'on sidelines' waiting to target distressed RE and PE

Hundreds of billions of dollars are sat on the sidelines waiting to invest in distressed corporate debt and real estate, according to funds lawyer Sandy Presant - but few investors will ‘jump’ now when opportunities could be better in six to 12 months time, a conference heard today.

More than $300 billion of equity is sitting on the sidelines waiting to invest in distressed real estate and corporate debt situations, according to Sandy Presant, chair of GreenbergTraurig’s real estate fund services.

Speaking at the annual US-Israel Business Summit in New York today, Presant said the real estate and private equity industries were sat on a large volume of uninvested commitments waiting for bid-ask spreads to narrow.

He estimated the dry powder waiting to be deployed was at least $300 billion – but could be as high as $500 billion.

AREA Property Partners chief financial officer Stuart Koenig told delegates at the forum the figure for opportunistic real estate funds could be much lower – closer to $50 billion – but that most investors were waiting for “seller expectations” to further align with what buyers were willing to pay.

“There’s a sense of ‘why jump in now when the opportunities could be better in December or January next year’. There is  a lot of that phenomenon taking place right now.”

Few deals are taking place amid the global market dislocation with worldwide property transactions down 67 percent over the past 12 months, with second quarter volume just $48.6 billion – a 5 percent fall from trading in the first three months of the year, according to real estate data provider Real Capital Analytics.

The Blackstone Group has already revealed in earnings calls it has more than $12 billion in dry powder for real estate investing, while a number of firms have raised funds in the past year – with much of it still uninvested. New York-based Westbrook Partners has around $3 billion in uninvested commitments, with $800 million of equity remaining from its $1.65 billion Westbrook Real Estate Fund 7, and its $2.5 billion Fund 8 remaining intact. Other firms are close to or have closed vehicles recently including Rockwood Capital, Mesa West Capital Partners and LaSalle Investment Management.