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CBRE GI has $5 billion in dry powder for 2016 – exclusive

The Los Angeles-based real estate investment manager is starting the year with $1 billion less in equity than last year after increasing investment across all regions in 2015.

CBRE Global Investors (CBRE GI), the real estate investment management giant, is starting the year with $5 billion in dry powder, down from the $6 billion in equity it ended 2014 with, PERE can reveal.

The Los Angeles-based firm invested $11.5 billion globally last year and sold assets for $9.6 billion. The decrease in dry powder can be largely attributed to the firm’s 25 percent increase in acquisitions volumes from 2014, Ritson Ferguson, the chief investment officer of GBRE GI, told PERE. The firm had $89 billion in assets under management as of December 31.

“It’s not surprising since we were a net investor that dry powder would come down a bit. Importantly, you can see that we’ve continued to restock the capital available for deployment,” he said. “We collectively still believe the global economy will grow and the US will be in growth mode, but one needs to be cognizant that this isn’t an accelerating growth cycle.”

CBRE’s capital inflows were nearly split between separate accounts, which accounted for 55 percent of the capital raised in 2015, and funds, which made up 45 percent. The firm raised most of its capital from Europe, the Middle East and Africa, and executed more than half its transactions in those regions, too. Ferguson said the majority of the capital available was raised for strategies that are focused on the US and on Europe, and that there was a diversified mix of risk profiles and a variety of asset classes within them.

The firm was a net seller in Europe last year, but Ferguson predicts CBRE GI will continue to be active both as a buyer and seller in 2016. In 2015, CBRE GI transacted $11.3 billion in Europe, compared with $10 billion in 2014, with about 60 percent of the 2015 deals in the retail sector. This year, Ferguson said the firm is looking specifically at investing in logistics and retail, with selective interest in office properties.

“Europe was an area where we have a lot of mandates and where investors’ interest was high, as that economy is earlier in the recovery cycle than other parts of the world,” he said.

Like Europe, Ferguson sees opportunity for logistics in the US in 2016. He said the firm will also continue to invest in apartments, despite some investors’ worry about an approaching peak in the market, which he predicts is still a few years away. CBRE GI’s US transactions totaled $7.8 billion in 2015, up from $5.6 billion in 2014, primarily in office and multifamily, with increasing activity in logistics.

“The US is clearly a market that has the best fundamentals in terms of the broader economy and by extension in real estate,” Ferguson said. “I think we’ll be a net investor in US again.”

In Asia, meanwhile, Ferguson pointed to Australia’s steadiness as a good sign and China’s slowing growth rate as a concern. Transaction volume in Asia totaled $2 billion in 2015, compared with $1.7 billion in 2014.

“Some of our bigger deployments last year were helping investors from Asia-Pacific invest in US and Europe,” Ferguson said. “I think that is a growing trend whether it be the large pension fund type clients or the sovereign wealth funds; it’s something we expect will continue. People recognize there’s an advantage to having a global view instead of a home country bias.”