It would surprise few people to learn that private real estate capital raising and deployment levels were adversely impacted by the global coronavirus pandemic. Government-imposed lockdowns and travel restrictions were bound to thwart activity – and so it proved on both fronts for the PERE 100, our signature ranking of private real estate managers by equity raised for discretionary value-add or opportunistic strategies in the last five years.
Covid-19 certainly played a meaningful part. A total of $242 billion was raised for 480 funds in 2020, down 18.5 percent and 27 percent respectively on 2019, according to reports by capital advisory firm Hodes Weill. This year’s aggregate fundraising total was $510.9 billion. At just 3.3 percent more than last year, that haul represents the slowest growth for the ranking since its inception. It was not all down to covid-19. A conspicuous absence of mega-fund closes – in many cases down to cyclical reasons – meant some of the usually prolific top 10 ranked managers saw their five-year totals meaningfully reduce. Blackstone, the sector’s heavyweight champion, has raised $49.9 billion in the past five years, still a colossal amount, but shy by some 23 percent off last year’s five-year total of $64.9 billion.
Subsequently, it should shock few that private real estate’s leading cohort of managers net deployed far less, too.
Investment by the PERE 100 in the year was $144 billion, down 34 percent on 2019 levels, according to numbers from Real Capital Analytics, the deals research business. RCA identifies how the PERE 100 net added $42 billion of real estate to its books, the largest volume of any year since the global financial crisis. However, this was as much to do with the fact it sold just $102 billion during the period, much lower than previous years.
Nonetheless, these muted activity levels have little to do with the PERE 100’s performance, which by most visible accounts, was still stellar. In our coverage, we identify target-hitting returns from the likes of Blackstone, Brookfield, Starwood and KKR, the last being one of the ranking’s notable risers. These performances far outdo those from core indices like ODCE’s and NCREIF’s, as they should, given their targets.
Consistency like this, coupled with a globally successful vaccination effort, should see the PERE 100’s growth – and deployment activity – resume a trajectory that feels today like it has been nudged by the coronavirus, but certainly not knocked off course.