The Wall St reshuffle

With most legacy bank platforms now gone from the ranking and the real estate arms of Morgan Stanley and Goldman experiencing a dip in qualifying fundraising activity, this year’s PERE 50 looks significantly different from years past.

Last year, PERE announced a ‘spring cleaning’ with regards to its PERE 30 ranking. A number of legacy platforms that got hurt by the global financial crisis and subsequently were acquired or wound down – including Lehman Brothers and Citi Property Investors – disappeared, thanks to the elimination of large funds that closed in 2006 and fell outside the ranking’s five-year fundraising window.

PERE also noted that the disappearance of those firms would leave Morgan Stanley Real Estate Investing (MSREI) and Goldman Sachs Real Estate Principal Investment Area as the last of the active bank-sponsored real estate platforms in the ranking. Indeed, that is the case with this year’s ranking, in spite of the fact that it has been expanded to 50 firms from just 30 previously.

More interestingly, PERE predicted that MSREI and Goldman, which last year were ranked two and three respectively, would experience a fall from their lofty perch in this year’s ranking. Again, this has now happened, with MSREI and Goldman declining nine and five spots respectively.

The problem for these two firms – as well as a few others like Beacon Capital Partners and Rockpoint Group – is that much of the capital that has fallen outside the ranking’s five-year fundraising window has not been fully replaced with new capital. Some firms have shifted their focus to strategies that are not included in the PERE 50 ranking, such as real estate debt in the case of Goldman. Others, however, have disappeared from view simply because they have not been able to replicate their previous successes on the fundraising trail.

And then there are those who have managed to keep going as though the financial crisis never happened. Indeed, three of the biggest fundraisers over the year are also the biggest climbers in the PERE 50. Starwood Capital Group closed its latest opportunity fund on $4.2 billion, which propelled the firm some 10 spots from 12th to 2nd in the ranking. Brookfield Asset Management, which is in the middle of marketing its first global opportunity fund, moved up 14 spots into 9th position on the strength of $2.63 billion in equity raised so far. Last but not least, Fortress Investment Group moved from 33rd to 19th place due largely to the success of its second Japan-focused fund, which closed on $1.65 billion late last year.

All this movement notwithstanding, there’s one important thing that has not changed since last year. The Blackstone Group cemented its place as far and away the biggest capital-raiser in the industry and retained pole position with the $13.3 billion collected for its most recent global offering. No one has ever raised a larger commingled real estate fund.

Indeed, so big is that fund that, had Blackstone not raised another penny over the past five years, the firm still would be atop the ranking. As it is, it garnered a total of nearly $32 billion over the past five years, which is more than the next four firms combined. In terms of fundraising prowess, Blackstone’s dominance over the rest of the market almost looks absurd. For how long it will endure is one of the many fascinating questions about the future of the industry.   

To read more about the PERE 50 and to see the full ranking, click here.