$80bn of uninvested equity sitting on real estate sidelines

Private equity real estate funds are currently sat on roughly $80 billion of uninvested equity, according to the latest fundraising data from The Townsend Group.

In the October issue of PERE magazine, the Cleveland, Ohio-based consultant revealed that existing closed-ended funds it tracked had nearly $80 billion of undrawn capital as they eyed global real estate markets for deals.

Although many limited partners are ready to invest, there’s just no rush. Martin Rosenberg, principal  The Townsend Group

The firm also currently monitors 404 closed-ended private real estate funds in fundraising mode, targeting a combined $121.6 billion of equity commitments. To date, those funds – targeting value-added, opportunistic and debt strategies worldwide, but not including open-ended or multi-manager – have corralled $14.3 billion, just shy of 12 percent of their original targets.

The findings are part of a PERE special report on the state of fundraising in 2010.

One of the main observations is that the number of funds being launched in 2010 is not set to be significantly lower than the volume of vehicles which entered the market in 2007.

According to Townsend, based on the number of closed-ended real estate funds launched as of mid-September, 2010 could see more than 250 vehicles enter the market targeting a diverse set of strategies globally. In 2007 and 2009, the number of funds launched was an estimated 260. The peak was seen in 2008, when the number of funds launched rose to about 325.

However, the amount of equity being committed to funds is nowhere near the levels seen in 2007 and 2008.
As Martin Rosenberg, principal at The Townsend Group, noted: “Although many limited partners are ready to invest, there’s just no rush.

“We have seen transaction markets start to move a little this year, but many LPs want to see a strong pipeline before making a long-term commitment and beginning to pay a management fee,” he added.

Read the full report in the October issue of PERE magazine out 1 October.