Thursday, April 16, 2009

Real estate fund-raising falls to 5-year low

A total of 22 funds closed last quarter, says research firm

(SEATTLE) Private equity real estate funds raised US$13 billion in the first quarter, the smallest amount in five years, as declining asset values deterred investors from committing new capital, Preqin Real Estate said.

A total of 22 funds closed last quarter, the lowest since Q4 of 2004, when 45 funds raised US$10 billion, according to the London-based research company.

The largest were Goldman Sachs Group Inc's Real Estate Mezzanine Partners at US$2.63 billion and London- based Orion Capital Managers LP's European Real Estate Fund III at US$1.34 billion, Preqin said.

Fund-raising stalled after the global credit crisis combined with a growing number of fund managers competing for capital caused managers to postpone closings.

There are an estimated 390 funds on the road trying to raise a combined US$227 billion, Preqin estimates.

'The number of funds abandoned has also risen,' said Ignatius Fogarty, a spokesman for Preqin, in a statement. 'We already have 14 confirmed cases of fundraisings being abandoned. This compares with 17 in 2008 and 12 in 2007.'

About US$7.6 billion of the funds raised last quarter may target debt and distressed real estate as managers try to take advantage of the market turbulence by buying assets at discounts, Preqin said.

The Q1 total excludes two large funds that have yet to be counted as having had a final close.

These are Morgan Stanley's new global real estate fund, which has raised about US$6 billion, and more than US$10 billion of new funds being raised by Dallas-based Lone Star Funds, according to Preqin.

The Morgan Stanley fund had a target of US$10 billion.

Preqin Real Estate compiles data on funds raised, returns and terms. -- Bloomberg

Source: Business Times, 16 April 2009

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