Red Fort captures $500m for second India fund

The New Delhi-based private equity real estate firm becomes one of few Asian firms in 2011 to have reached its capital raising target after holding its final closing in December.

Private equity real estate firm Red Fort Capital has reached its fundraising target of $500 million for its second India-focused opportunity fund, PERE can confirm.

The New Delhi-based firm held its official final closing for the fund, Red Fort India Real Estate Fund II, at the end of December after attracting capital from a number of institutional investors, many of which were investors in its first fund.

The fundraising effort has been lauded by market commentators as a real victory for an India focused firm given a dearth of successful international capital raising efforts for the country following a mixed performance in the sector since the Indian government permitted foreign direct investment in 2005.

Indeed, the firm’s efforts have seen it nominated for Asia firm and capital raising of the year in the 2011 Global PERE Awards. Its fundraising advisors Park Hill Group and Jones Lang LaSalle were nominated for the Asia placement agent of the year award also.

PERE understands that, of the approximately $500 million raised, about $400 million was collected in the actual fund and a further approximately $100 million was raised via co-investment pools.

Undoubtedly, the firm’s current performance in its original fund played a large part in attracting investors, understood to include the Abu Dhabi Investment Authority which is well known to have lately invested in far fewer funds than it previously did. Other investors hail from the US, Europe and Asia.

The original Red Fort India Real Estate Fund, which attracted $400 million of commitments, is currently projecting IRRs of 22 percent and an equity multiple of 2.2x, according to sources familiar with the matter. The firm has typically invested in India’s affordable housing sector and has built something of a reputation for quick sales. In the last 18 months, Red Fort is understood to have sold more than 12,000 units, returning about one-third of the equity of the first fund in the process. The firm is also understood to have committed more than $180 million of the second fund’s equity resources to a number of new transactions.

According to India research provider Venture Intelligence, private equity-style businesses made a total of 69 investments in the real estate sector during 2011. Of those, 53 transactions which were announced had a total value of $2.68 billion, significantly higher than the $1.58 billion of transactions recorded by the provider in 2010.