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EUROPE NEWS: In demand

Not that anybody doubted it, but Europe was the most in-demand region in the world during the first quarter of the year.
Fundraising for private real estate performed very strong globally, but Europe was the star of the show with some $14.6 billion in commitments, according to PERE Research & Analytics. The total includes commingled funds, joint ventures and separate accounts for private real estate strategies.
Blackstone Real Estate Partners Europe IV, which held a final close on
€5.1 billion, was the largest fund raised anywhere in the world in the first quarter, helping Europe towards becoming the hottest market in the world.
Even without counting the Blackstone effort, fundraising for Europe still surpassed North America ($6 billion), previously the dominant region for private real estate fundraising.
Kristin Berry, New York-based senior research analyst at PERE Research & Analytics, said: “[With] confidence in European private real estate growing, fund managers have launched and successfully raised a wide variety of funds targeting the region.”
There has been a dramatic spike in capital raised for Europe in the first quarter of 2014 compared with the previous quarters (see chart below). In the final quarter of 2013, $6.7 billion was raised. The figure for the third quarter of 2013 was $5.8 billion.
“While this can be credited to an increase of capital by small funds and a particularly large fund that held a final close, a consistent growth in capital raised by medium-sized funds supports the thesis of a growing market,” Berry said. She added that real estate debt has become an increasingly prominent strategy in Europe as seen by the increasing number of medium and large-sized funds in the past couple of years.
Meanwhile, in the first quarter, excitement has been generated by a number of investor moves. The Alaska Permanent Fund formed a £250 million separate account with LaSalle Investment Management to invest in the UK, marking its first investment in commercial Europe real estate.
Taking a similar first step, the Illinois State Board of Investment approved a plan to make its first investments outside the US, allocating up to $150 million per year to Europe as well as Asia-focused funds. Additionally, the Public Employees Retirement Association of New Mexico approved an $80 million allocation to real estate with an eye towards Europe.
These moves are being made at a time when several new entrants are raising first-time funds in the region. Angelo, Gordon & Co, the New York-based firm, has raised more than $50 million for AG Europe Realty Holdings, according to an SEC filing. Bayside Capital, a US credit group, is reportedly out raising its first fund as well.