Interest rate hikes and elevated inflation have impacted investor appetite, fundraising and dealflow across private markets, including real estate, but Carlyle’s executives believe the sentiment is showing signs of shifting.
“These economic forces have slowed the pace of investment across the industry. You see this in the amount of capital we are deploying, and you see it in lower fundraisings, LPs’ slow decision-making on new fund allocations,” Harvey Schwartz, chief executive at Carlyle, said during the firm’s second-quarter earnings call. “Having said that, in general, our teams are seeing signs of an increasing pace of early dealflow access across most asset classes.”
Speaking about the current dealflow in the market, Schwartz added: “There has been a marked improvement in sentiment. And I think we can be more optimistic about activity going forward.
“But I’d say the market still feels fragile. CEO confidence is improving, but we have had a major shift in the cost of capital that’s still being digested. Of course, this will be worked through. But that would give you that perspective at a high level that we’re seeing some interesting opportunities.”
Carlyle’s global private equity platform, which includes corporate private equity, real estate, and infrastructure and natural resources, invested capital worth $1.8 billion in aggregate in Q2 2023. The firm’s real estate strategy accounted for the bulk of the capital deployed through the platform, with $1 billion invested during this period.
The real estate activity was led by Carlyle Realty Partners IX and the Core Plus Real Estate fund. CRP IX, the firm’s ninth US opportunity fund, hit its hard-cap of approximately $8 billion in December 2021, becoming the largest and fastest real estate fund the firm has ever raised. According to Carlyle’s earnings call documents, CRP IX was 33 percent invested as of the end of Q2.
Meanwhile, the 2016-vintage CPI, which has $7.8 billion in committed capital, is nearing full deployment with 92 percent of the capital invested.
Schwartz also expressed a positive outlook for fundraising in real estate and other asset classes.
“We feel this year is going to be better than last year, broadly across the diversified platform,” he said. “There’s a lot of momentum in credit. There’s a lot of momentum across the insurance complex. So, we feel good about that. There’s a lot of momentum in real estate.”
John Redett, the firm’s incoming chief financial officer and head of corporate strategy, added: “Fund investors continue to face challenging decisions and make commitments more slowly than in previous years. Despite this slowdown, we still expect to raise a larger amount of capital in 2023 than we did in 2022.”
Through the first half of 2023, Carlyle raised approximately $14 billion of new capital in aggregate, or 55 percent of the nearly $25 billion amassed over the last 12 months. In real estate, the firm raised $100 million during this quarter, taking its total fundraising for the strategy to $400 million year-to-date and $800 million for the last 12 months.
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