Private equity real estate confidence rebounded in 2011

There was an ‘increase in confidence’ among private equity real estate firms last year, as evidenced by a 61.7 percent increase in the targeted equity for newly launched vehicles compared to 2010.

Private equity real estate firms were more confident last year than the year before despite the European financial crisis. As a resulr, last year saw a 61.7 percent increase over 2010 levels in the total equity targeted by newly launched funds, according to independent investment advisory firm Swisslake.

In its Real Estate Private Equity Funds Report 2011, which was released yesterday, Swisslake said a total of 239 funds were launched in 2011 –  a 12.7 percent rise on 2010. The firm also noted that an indicator of returning confidence was that the value of many funds launched prior to the global financial crisis had, for the most part, recovered.

“On the investors’ side, an increase in confidence in terms of investments in private equity real estate funds has been recorded,” the firm said. “Accordingly, more funds were raised than in the previous year. This is an important sentiment indicator, which also is reflected in the behavior of private equity real estate funds.”

In addition to these improved indicators, Swisslake said there had been a return of mega-funds in 2011, as well as the return of opportunistic managers and strategies. The return of opportunistic funds and strategies seems to have coincided with signs that core and value-added vehicle launches began to tail off last year. While in 2010, core and value-added funds accounted for around 60 percent of the entire equity targeted by private equity real estate funds, this number decreased last year to around 50 percent.

Bernhard Köhler, chief executive offficer and founder of the firm, summed up the report’s overall findings by saying the international real estate fund industry had fought hard to adapt to the changing demand to come up with new products and strategies. He added: “The saturation effect is starting to manifest itself in certain segments, such as core funds. As expected, Europe-focused funds witnessed a decline whereas Asian funds posted strong recovery data.“

The biggest single geography where funds were raised in 2011 was North America. The region attracted $20 billion of equity, accounting for 42 percent of the total equity committed globally to funds.