The covid-19 outbreak may have paused investment activity for a few months, but last year turned out to be buoyant for real estate debt managers when it came to raising equity for the purpose of issuing loans. PERE’s annual ranking of the world’s largest real estate debt managers points to an active fundraising year for all types of risk and return strategies, from senior debt to special situations.

Uptick in fundraising

The top 50 firms in the RED 2021 ranking cumulatively raised approximately $190 billion via private real estate debt funds and co-investment sidecars over the past five years, around 20 percent more than the $158 billion, five-year haul of last year’s ranking. Fundraising has been hard for certain strategies amid travel restrictions and lockdowns. But a flight to safety for many institutional investors has meant a greater demand for products offering a greater degree of principal protection.

Dominance of US managers

North American firms dominated this year’s ranking, accounting for more than 30 of the 50 names. Leading this pack is Blackstone, with $13 billion in approximate capital raised. Two of the new entrants this year – Berkshire Residential Investments in the 21st spot and 3650 REIT in the 43rd position – also focus on lending stateside. Continued lending momentum for US commercial real estate, even as the pandemic raged, was a key contributing factor.

Transactions house Real Capital Analytics noted how most property sectors posted only slight declines in market participation by active lenders in 2020, compared to 2019. The industrial sector, in fact, recorded 20 percent more active lenders at the end of 2020 versus a year ago. Lending for the multifamily sector also continued unabated. Berkshire Residential Investments, for example, was able to raise $60 million from New Mexico State Investment Council and $200 million from Tennessee Consolidated Retirement System, among other investors, for Berkshire Multifamily Debt Fund III, a 2020-vintage mezzanine debt fund.

Asia special situations growth

One of the most notable changes in the ranking this year is the debut of Hong Kong-based manager PAG, in part due to its push into special situations-focused fundraising. The firm opens in third spot with $8.7 billion in aggregate capital raised across several pan-Asia and China-focused vehicles, and accompanying sidecars.

For instance, the $1 billion PAG Special Situations Fund III, which closed in November 2019, was followed by PAG Special Situations Fund 3.2. PERE understands the top-up vehicle, with a $250 million-$300 million target, was launched specifically to capitalize on growing special situation investments in the wake of the pandemic.


In a year marred by travel lockdowns and challenges in securing new investor commitments, RED 50 managers were successful in raising 20% more in capital for funds focused on debt issuance than last year

China is one of the firm’s target deployment markets for lending. As an executive familiar with PAG’s fundraising efforts explains to PERE, while the Chinese economy recovered quickly following stringent covid-19 measures in Q1 2020, there are expectations of distress opportunities and default situations arising from the government’s recent efforts to restrict debt to developers. As such, the firm is also understood to be in the market with PAG Loan Fund V, targeting $2.5 billion for real estate lending in China as well as South Korea, Australia, New Zealand and India.

Europe’s lending opportunity

Unlike Asia, the window for distressed debt deal-making has not opened in Europe yet. Widespread government stimulus and an accommodative monetary policy by central banks helped stabilize markets throughout the crisis and lenders have not been forced to default yet. However, banks pulling back from actively lending for commercial property transactions created demand for senior mortgage lending vehicles in 2020. London-based firm DRC Capital, for example, moved up five spots to 17th position in this year’s rankings due to a busy fundraising year.

Dale Lattanzio, managing partner at DRC Capital, tells PERE the firm is currently fundraising for three strategies – whole loan, core-plus senior debt, and high-yield – targeting an aggregate two billion, evenly split between pounds and euros. This includes an €800 million target raise – at a €1 billion hard-cap – for the firm’s European senior debt fund series.

Lattanzio believes the demand for debt continues to pick up pace even today. “While we are getting towards normalcy with the respect to how we live our lives, the uncertainty about the shape of the economic recovery still exists,” he says. “That hasn’t brought the banks back to lending in a meaningful way just yet.”