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RE secondaries hit three-year high as restructurings soar

Around $7.2bn worth of real estate secondaries deals closed or were placed under contract last year, according to research from Landmark Partners.

Real estate secondaries volumes reached a three-year high last year as fund and portfolio restructurings soared, sister publication Secondaries Investor has reported.

Some 127 transactions, representing approximately $7.2 billion of net asset value, closed or were placed under contract in 2019, according to research from Landmark Partners. Last year’s activity was second-only to the $8.2 billion recorded in 2015 and marked a 36 percent increase from 2018.

The private equity and real estate secondaries firm said fund recapitalizations rose 86 percent to $3.9 billion, the first time such transactions have accounted for more than half of the annual total. Last year’s total reflects an increasing number of transactions involving more recent vintages, in addition to the more typical pre-crisis vehicles that have exceeded their legal termination dates, the report noted.

Last year’s spike was despite no single transaction exceeding $1 billion, Landmark said. By comparison, 2015 had two such deals, both involving US public pension funds.

US-weighted partnerships accounted for 49 percent of volume last year, followed by Europe at 31 percent, Asia at 11 percent and global partnerships or other funds at 8 percent.

Excluding fund and portfolio recapitalizations, US and non-US pension funds were the most active sellers last year at 18 percent and 12 percent, respectively. Sales by endowments and foundations fell 37 percent to $154 million, or 2 percent, of the 2019 total.

US sellers generated 63 percent of total volume, followed by Europe at 23 percent and Asia at 13 percent.

Real estate as a percentage of total secondaries deal volume was unchanged between 2018 and 2019, according to Evercore’s latest annual report, published Tuesday. The asset class accounted for 4 percent of overall volume across both years.

Strategic Partners’ secondaries unit held a first close on its seventh real estate secondaries program in November. The Blackstone unit raised $787 million for Strategic Partners Real Estate VII from 55 investors, Secondaries Investor reported at the time.

– Adam Le contributed to this report.