The giants of the private equity real estate world have raised bigger funds in 2015 compared with any other post-crisis year yet, forcing them to deploy capital in significantly larger chunks, according to research from global property services firm Jones Lang LaSalle.
JLL noted that 2015 saw the most opportunistic capital raised since 2001 and was largely responsible for huge capital deployments in 2015.
Opportunistic capital accounted for nearly 60 percent of overall fundraising, compared with 22.7 percent of fundraising in 2014. The number of funds closed did not near 2007’s peak, when 41 opportunistic vehicles closed. But the five largest opportunistic funds raised this year garnered an average of 34 percent more capital than the previous funds in the series.
Overall, while the quantity of funds raised is far short of 2007, the average size of a closed opportunistic fund nearly quadrupled from 2007 to 2015, to $1.9 billion, according to JLL.
This boost in opportunistic capital is “evidence of a heightened appetite for higher yielding transactions in a continually compressing US yield environment,” JLL wrote in an investment outlook report.
The Chicago-based firm noted that these huge funds have led to myriad deals bigger than $1 billion. These acquisitions have ranged from The Blackstone Group’s various multifamily, single family and residential purchases through the $15.8 billion Blackstone Real Estate Partners VIII to Starwood Capital Group’s $5.4 billion multifamily buy from Equity Residential through the $5.6 billion Starwood Global Opportunity Fund X.
“These larger portfolio, entity-level and now structured M&A deals are providing opportunities to achieve scale, access attractive product and favorable relative yields,” JLL said in a market report.