PERE: RE fund closes at five-year low

The number of property funds with final closes in 2015 year-to-date is on track to be the lowest since 2010.

Although private equity real estate fundraising continues to remain strong globally, fewer property vehicles have been closing each year over the past several years, according to new quarterly statistics from PERE Research & Analytics.

The team’s research revealed that 97 real estate funds have been raised globally during the first half of 2015. This means that the industry is on track to close on less than 200 funds this year, which would be the lowest number of final closes for property funds since 2010, when 182 final closes occurred. By comparison, 263 capital raises were completed in 2011, 295 in 2012, 293 in 2013 and 245 in 2014, PERE Research & Analytics said.

These annual tallies also revealed several other fundraising trends in private equity real estate. Firstly, the number of funds with final closes has been steadily declining since 2012, when the tally reached a post-crisis high of 295. Second, despite the reduction in the number of fund closes over the past several years, “capital is staying strong – meaning that average fund sizes are increasing,” the PERE Research & Analytics team said Meanwhile, “since 2010, PERE fundraising has gradually increased, and reached a post-crisis record in 2014,” said PERE Research & Analytics. “H1 2015 numbers are still strong, but do not look like they are at record levels.” Indeed, 2015 is on pace to post a smaller fundraising total than the previous two years, the statistics revealed.

In other capital raising trends, opportunity funds remain the biggest draw for investors, accounting for $17.6 billion of the aggregate capital raised through funds with final closes during 2015 year-to-date, followed by value-added with $14.9 billion and debt with $12.6 billion, according to the quarterly statistics. Opportunistic strategies have consistently attracted the most capital over the past eight years, with the exception of 2010 and 2011, when value-added funds showed a slight edge. However, the gap between the fundraising totals of opportunity and value-added vehicles has narrowed considerably since 2008 and 2009, when opportunity funds were commanding double the capital of their value-added counterparts, the data disclosed.

Meanwhile, in terms of geographical focus, North America continued to command the most investor demand among real estate funds that closed in the first half of 2015, representing $20 billion of aggregate capital raised, with global funds a close second at $16.9 billion and Western Europe a distant third with $8.9 billion. North America-focused vehicles are likely to attract a similar volume of money as they did last year, but global strategies are due to amass the largest amount of capital since 2008, when they attracted $45.2 billion in aggregate. The equity totals of subsequent years ranged from $13 billion in 2010 to $30.1 billion in 2013, according to PERE Research & Analytics.