Carlyle targets largest opportunistic fundraise

The Carlyle Group is seeking $5 billion for its eighth opportunistic fund, the largest target for the firm’s US real estate series, PERE has learned.

The Washington, DC-based alternative asset manager started pre-marketing Carlyle Realty Partners (CRP) VIII in the third quarter, chief executive David Rubenstein said on firm’s October analyst call, adding that “the reception to that [pre-marketing] has been pretty good” and the “fund is pretty likely to be bigger than the last one.”

Sources familiar with the fundraising process said the firm is seeking to raise $800 million more than the predecessor vehicle. Carlyle launched CRP VII in 2013 and closed it in December 2014 on $4.2 billion, at the fund’s hard-cap, PERE previously reported. CRP VII had $1.9 billion invested and a 1.2x investment multiple as of September 30, according to the third quarter earnings statement.

Because the fund’s investment period began in March 2014, the “returns are not considered meaningful” and were not reported in the third quarter, Carlyle said in its report. The sixth fund in the series had a net internal rate of return of 22 percent as of September 30.

Carlyle’s opportunistic fund series focuses on acquisitions, value enhancements and dispositions of mispriced and undervalued real estate assets in the US, primarily single-asset transactions involving office, residential, senior living, hotel and retail properties. On the earnings call, Rubenstein said the firm invested more than $300 million in real estate during the third quarter, with a particular emphasis on medical housing and senior housing.

Carlyle joins other private equity firms on the opportunistic real estate fundraising trail, the largest of which is Starwood Capital Group’s Starwood Opportunity Fund XI Global, according to PERE data. The Greenwich, Connecticut-based firm is targeting between $5 billion and $6 billion and held a first close in October on $2.7 billion, PERE previously reported.

Brookfield Asset Management is also likely marketing its next opportunistic vehicle soon. The Toronto-based investment manager closed Brookfield Strategic Real Estate Partners (BSREP) II in April on $9 billion, PERE reported at the time.

As of the end of the third quarter, that vehicle was already 67 percent invested, and the firm typically begins fundraising for its next fund once its predecessor is 70 percent to 75 percent invested, Brian Lawson, the firm’s chief financial officer, said on the firm’s November earnings call. Concurrently, Brookfield is raising capital for its open-ended real estate fund and a real estate finance vehicle.

Similar to Brookfield, Carlyle is also raising funds for another real estate strategy. In addition to its opportunistic fund, the firm is continuing to raise capital for its new core-plus real estate fund, Carlyle Property Investors. In August, PERE reported that the firm had raised about $500 million for the vehicle and expected to raise another $500 million before the end of the year.

In the third quarter, Carlyle’s total assets under management were $169.1 billion, down 10 percent year-on-year, largely because of $8.7 billion in distributions during the three-month period, according to the earnings report. The firm managed $35.7 billion in real assets, down 11 percent year-on-year.

Rob Stuckey leads the firm's US real estate funds.