Fundraising dipped in 2016 by both volume and funds closed, though the biggest players had little trouble blowing past fund targets, according to PERE data.
By mid-December, private equity real estate firms had raised $100.8 billion and closed 181 funds. Fundraising post-global financial crisis peaked by capital raised in 2015, with $146.5 billion raised and 243 funds closed. This year’s volume aligned more closely with 2012, when firms raised $106 billion.
With four global funds making the top list, investors seemed to prefer a wide geographic focus. The asset class also saw an emphasis on real estate vehicles with wider investment mandates, including other strategies like real estate debt, other than pure equity funds.
Here are the top five funds of 2016:
1. Brookfield Asset Management, a perennial top fundraiser across its alternative strategies, closed the largest fund of 2016 in April, its $9 billion Brookfield Strategic Real Estate Partners (BSREP) II. In November, executives said the opportunistic fund was already two-thirds deployed, and the firm began readying its next flagship property fundraise. Toronto-based Brookfield launched BSREP II in 2014 and held a first close in April 2015.
2. Lone Star Funds took the next two spots. In second place, the Dallas-based firm raised $5.9 billion for Lone Star Real Estate Fund V, thereby closing the opportunistic real estate vehicle above its $5.5 billion hard cap in just five months. The investor base comprised 95 percent returning investors and drew about $385 million from Lone Star affiliates, including asset manager Hudson Advisors and Lone Star chairman John Grayken.
3. In third place, Lone Star’s private equity fund, Lone Star Fund (LSF) X, closed on $5.6 billion in November, some 22 percent below its predecessor vehicle. LSF X has a varied strategy, targeting private equity control investments in companies; single-family residential real estate secured debt, corporate debt and consumer debt; and single-family residential real estate assets, among other investments. The fund has a 25 percent gross internal rate of return target.
4. Taking fourth was fundraising powerhouse Blackstone, which raised $4.5 billion for Blackstone Real Estate Debt Strategies (BREDS) III. The New York-based alternative investment behemoth launched the initial BREDS platform in 2008 and raised $3.3 billion for BREDS II. Blackstone closed the third vehicle in August after holding a first close in January on $1.3 billion. With capital from the fund, the firm invests in transitional assets and mezzanine loans mainly in the US and Europe, but Blackstone has hired or plans to hire investment professionals in Hong Kong, Australia, Mexico and Canada to expand its global reach.
5. Rounding out the top capital raisers was Boston-based Rockpoint Group, which closed Rockpoint Real Estate Fund V in March at $3.3 billion. The only North America-focused fund on the list, the firm blew past its $2.5 billion target for the opportunistic fund after 15 months of fundraising. The vast majority of limited partners, who came from the Middle East, Asia, Europe, Canada and the US, were existing investors. Similar to the strategy of its previous funds, Rockpoint plans to acquire office, hotel and multifamily properties in the largest US coastal markets.