According to data compiled by Private Equity Real Estate, private equity real estate funds have raised a total of $59.5 billion (€45.8 billion) in 2006, far surpassing the $37 billion raised in 2005.
The record amount of equity, along with favorable debt markets, is fueling much of the recent activity in the US real estate markets, including the $39 billion acquisition of Equity Office Properties Trust by The Blackstone Group and the $9 billion takeover of Station Casinos by Colony Capital.
The growing influence of private equity real estate firms is also being felt around the world. Funds with a global mandate accounted for approximately 45 percent of the capital raised in 2006. Private equity real estate funds targeting Europe and Asia also accounted for a substantial amount of equity, raising approximately $6 billion and $4 billion, respectively.
Institutional investors, lured by the strong performance of real estate relative to other asset classes over the past decade, are increasing their allocations to the sector. And within real estate, high-target-return vehicles such as private equity real estate funds are gaining in popularity. Funds currently in the market or coming to market within the next 12 months are targeting approximately $80 billion in capital, according to Private Equity Real Estate, suggesting that 2007 could rival 2006 in terms of fundraising and deal activity.
Blackstone, for example, is raising a $10 billion fund. Morgan Stanley is raising an $8 billion vehicle. And Lone Star is rumored to be raising $6 billion. Each of these funds on its own would surpass the largest private equity real estate fund ever raised, Blackstone Real Estate Partners V, which closed on $5.25 billion in 2006.