Carlyle eyes its biggest property fund ever

The Washington, DC-based private equity firm is said to be gearing up for what could be its largest real estate capital-raise to date.

The Carlyle Group is planning to launch its latest US real estate fund, Carlyle Realty Partners (CRP) VII, targeting up to $4 billion in commitments.  If successful, the fundraising would be the Washington, DC-based private equity firm’s largest in property to date, exceeding the $3 billion equity haul for its 2006 vintage fund, CRP V. News of the new fund was first reported by the Wall Street Journal. Carlyle officials declined to comment.

News of the new offering comes less than two years after Carlyle held a final close of $2.3 billion on its predecessor vehicle in the opportunistic series, CRP VI, in late 2011. The firm has invested $835.8 billion, or approximately 35 percent, of the fund’s capital as of March 31, according to its first quarter earnings report. CRP VI was generating a net internal rate of return of 16 percent, while CRP V was yielding a 7 percent IRR as of the end of the first quarter.

The CRP funds target opportunistic investments in the major North American metropolitan markets, primarily in the residential, hotel, industrial, office and retail sectors. In February, Carlyle and ClearRock Properties acquired 920 Broadway, a 106,000-square-foot office tower in New York City’s Flatiron District, from Einstein College at Yeshiva University for $58.5 million, according to data provider Real Capital Analytics.

Earlier this month, Carlyle announced that it had sold 650 Madison Avenue in New York to Crown Acquisitions and Highgate Holdings for $1.3 billion. Carlyle originally bought the property on behalf of CRP V for $680 million through a joint venture with Ashkenazy Acquisition, according to RCA.

Carlyle’s latest real estate offering comes at a time when other private equity real estate giants are coming to market with new mega-funds targeting $1 billion or more. TPG Capital and Kohlberg Kravis Roberts & Co both are eyeing their first real estate-focused vehicles, while Morgan Stanley Real Estate Investing reportedly is launching a global opportunistic real estate fund seeking as much as $3 billion after initially planning multiple regional offerings.

To date, Carlyle has not raised a global real estate fund, instead focusing on a series of regional funds targeting North America, Europe and Asia. This includes its third pan-Asian property fund, Carlyle Asia Real Estate Partners III, which was launched earlier this year and has an equity target of $750 million. A first close for that fund is expected this summer.