Residential real estate fundraising: a year in review

After a fast start, fundraising in 2022 dipped in mid-year before rallying.

More capital was raised for residential real estate funds in 2021 – $30.88 billion – than had been raised in any prior year. Fundraising then went from strength to strength; at the end of Q1 2022, it looked like a new annual record was on course to be set, but a mid-year slump threatened to throw a wrench in the works.

Despite setting a Q1 record with $8.36 billion raised – some $200 million more than had been raised in the first quarter of 2021, and over $2.5 billion more than had been raised in any other first quarter – the second and third quarters disappointed.

Q4 2022 saw $11.37 billion raised, smashing past the $7.88 billion raised in Q4 2021. In the end, it meant that $33.55 billion was raised over the full year, some $2 billion more than had been raised the year before.

The five largest funds to close in the year did so in each of the year’s four quarters. The big beasts of the year started with FPA Multifamily’s $1.45 billion Q1 fund, before Pretium Partners’ $1.7 billion Q2 fund, Greystar Real Estate Partners’ $1.63 billion Q3 fund and then Bridge Investment Group’s $1.74 billion Q4 fund. The year then ended with the biggest of all in December, as India’s SBICAP Ventures closed Special Window for Affordable and Mid-Income Housing Fund Investment Fund I on $1.98 billion.

The BIG fund – Bridge Workforce and Affordable Housing Fund II – was almost three times the size of its $619 million predecessor fund. It is also the largest dedicated workforce housing fund ever raised, according to PERE data, overtaking Avanath Capital Management’s Affordable Housing IV, which closed on $760 million in 2020.

Taking the trophies

Greystar was busy beyond its fundraising, and the firm won Residential Investor of the Year: Europe and Residential Investor of the Year: Asia-Pacific in PERE’s 2022 awards. The former award was partly for its joint venture with Singaporean sovereign wealth fund GIC, which acquired Student Roost, the UK’s third-largest purpose-built student accommodation provider for £3.3 billion ($4.1 billion; €3.7 billion) from Brookfield Asset Management, which also helped it to win another award – Institutional Investor of the Year: Europe.

Residential property was a common feature of our European awards, with global manager Hines also winning in Europe for Central & Eastern Europe Firm of the Year due to its endeavors in private rental housing, having formed a joint venture with pan-European real assets business Kajima to target such opportunities in Poland. 

In Asia-Pacific, Japan loomed large, with KKR taking home awards for Firm of the Year: Asia-Pacific, Industry Figure of the Year: Asia-Pacific (for John Pattar) and Deal of the Year: Asia-Pacific, in large part due to its $2 billion acquisition of Japanese REIT manager Mitsubishi Corp-UBS Realty. However, it was Qatar Investment Authority’s acquisition of 32 Japanese residential assets through a separately managed venture with Gaw Capital which saw that Hong Kong-headquartered firm win Firm of the Year: Japan.

Harrison Street won Residential Investor of the Year: Global and Residential Investor of the Year: North America awards, the latter not least because of a $1.5 billion joint venture it formed with Core Spaces, focused on single-family rental, as well as a $1.4 billion commitment to investment in senior housing and the announcement of its inaugural partnership to provide military housing.

Meanwhile, Blackstone won Deal of the Year: North America for another residential transaction: the $12.8 billion take-private of American Campus Communities, the last standing public REIT focused on student housing.

North American dominance

It is striking that Greystar’s $1.63 billion Q3 fund was the only Europe-focused fund to make the top 10 last year. Six had a North America focus and three targeted Asia-Pacific: the SBICAP Ventures fund, which led the way, as well as offerings from Azure Capital Partners and Kotak Investment Advisors.

North America’s dominance of the sector extends beyond the top 10 as 70 percent of capital raised for residential real estate funds last year had a North America focus, with Europe accounting for 10 percent and Asia-Pacific 20 percent. Multi-regional funds, Latin American funds, Sub-Saharan African funds and Middle East and North Africa funds did not register.

With 80 residential funds closed in the year overall, the sector accounted for 46 percent of capital raised by sector-specific offerings, narrowly leading industrial while the likes of office, hospitality, healthcare and retail trailed.

Over half of all capital raised for residential funds last year was for value-add strategies, with debt and opportunistic funds also each taking a respectable slice of the pie. Core and core-plus funds accounted for only 16 percent of capital raised between them.Â