During The Carlyle Group’s earnings call in late July, co-chief executive officer David Rubenstein made a rather surprising statement: that the firm was bullish on real estate.
“Real estate is important for us,” he said. “For a variety of reasons, we think it’s going to be a great growth business for a long time.”
Statistics on the firm’s acquisitions and dispositions activity, however, would appear to indicate the opposite. Indeed, the Washington, DC-based private equity firm has been a net seller – and by a wide margin – every year since 2011, according to data provider Real Capital Analytics. In 2015 year-to-date, for example, the firm made a total of $559.15 million in acquisitions and $2.86 billion in dispositions.
According to one source familiar with the firm, Carlyle’s net selling position likely has to do with the shrinking of its real estate operations in Europe and Asia, having not raised any new funds in both regions for several years. In 2015 year-to-date, Carlyle has made no acquisitions or dispositions in Asia and $2.03 billion in dispositions in Europe.
The US is considered Carlyle’s strongest region in real estate, as evidenced by the recent final closing of its largest property fund to date, the US-focused Carlyle Realty Partners (CRP) VII, at its hard cap of $4 billion. However, even in the Americas, Carlyle still has been a net seller, making $559.15 million in acquisitions and $835.93 million in dispositions.
Certain factors, however, need to be taken into account when looking at Carlyle’s net seller position. The firm, for example, has acquired a number of development sites over the past several years, and with such transactions, the purchase price of the land is typically recorded without factoring in any additional capital invested in the property, which can distort the gap between acquisition and disposition volumes.
Meanwhile, Carlyle is expected to ramp up its acquisitions activity stateside as it invests CRP VII. It is also seeking to rebuild its real estate operations in Europe and Asia, hiring TPG’s Adam Metz in 2013 to help spearhead those efforts. But as rebuilding doesn’t happen overnight, it’ll likely have to content with being a net seller for some time to come.
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