Carlyle has enticed investors that previously backed its faltering European opportunity real estate fund series to return for its latest effort in the region, PERE can reveal.
The Washington, DC-based private equity firm was once one of the biggest fundraisers for private real estate’s highest risk and return strategy in Europe, raising €2.2 billion in equity for the third fund in the series in 2008.
Alongside numerous peers which launched large opportunity funds shortly before the global financial crisis, Carlyle Europe Real Estate Partners III performed poorly. Indeed, in 2014, investors were understood to be looking at a return of 12 cents on the dollar for the fund.
Since then, however, a new-look management team, led by ex-Blackstone senior managing director Peter Stoll, have reversed the fund’s fortunes and, when PERE last reported on it last July, the vehicle’s performance had improved: the assets were understood to be generating an internal rate of return of 1-2 percent and a 1x equity multiple, meaning investors would at least receive their equity back.
As PERE reported previously, this improved performance has enabled the firm to shift its focus from asset managing CEREP III to marketing a fourth vehicle, Carlyle Europe Realty Fund I.
Carlyle declined to discuss its fundraising but it is understood that a proportion of CEREP III investors have returned with new commitments.
Their commitments are among the approximately €300 million Carlyle has raised for the fund’s initial close.
Further, when PERE previously reported on the fundraising, a target was expected to be lower than €1 billion, but had not been set. However, the equity goal is now understood to have been fixed at €500 million, meaning the firm is well past the halfway mark in its capital raise. A final closing is thought to be slated before June.
For a number of reasons including CEREP III’s performance, the firm’s lengthy absence from the commingled fundraising space in Europe, significant personnel changes and the objective of bringing the vehicle’s identity more in line with its US counterparts, the firm’s European opportunity funds were rebranded Carlyle Realty Europe.
Carlyle made four investments in Europe in the months leading up to the launch of CERF I. The investments were made using balance sheet capital and third-party money via joint ventures and club situations, but with a view to using them to seed the vehicle. Another two deals have subsequently been added to the fund’s portfolio.
In PERE’s previous report, Stoll said: “Up until 2016, about 80 percent of our time was focused on portfolio asset management and sales and just 20 percent on new business. By January [last] year, we’ve seen that reverse: now 80 percent is focused on new business and investor relations and just 20 percent on asset management. In that context, we’re now putting together a number of new investment platforms.”
He added: “Our dialogue with investors shifted to what’s next, what’s new.”