Closed-end private real estate funds that focus on debt investments have had a successful fundraising year by raising a total of $20bn in capital in 2014, higher than in any other previous year, according to Preqin.
A total of 26 debt funds raised a combined $20bn, up from 29 funds raising $16bn in 2013.
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Aggregate capital raised across all real estate strategies worldwide reached $90bn, just below the $92bn raised in 2013, but is expected to increase by 10-20% as more information becomes available.
However, the total number of funds that reached a final close has seen a notable drop-off, with 177 holding a final close in 2014 compared to 239 in 2013, as capital becomes ever more concentrated among a handful of the larger players.
Private Real Estate Fundraising Key Facts:
- The average real estate fund size reached its highest level ever, $528mn for funds closed in 2014 compared to $417mn in 2013.
- Almost half (48%) of funds closed in 2014 exceeded their target size, compared to 44% of funds that closed in 2013.
- Funds focusing on Europe raised 131% more capital in 2014 than in 2013, $36bn compared to $15bn. Thirty-nine percent of capital raised in 2014 has a primary focus on Europe, compared to 17% of capital in 2013.
- North America-focused fundraising witnessed a notable decline – these funds raised $44bn in 2014, compared to $63bn in 2013.
- 2014 saw the largest Asia-focused fund ever closed, Blackstone Real Estate Partners Asia, which raised $5bn.
- The largest fund closed globally in 2014 was Blackstone Real Estate Partners Europe IV, which closed on 6.6bn in March.
- Funds that closed in 2014 took an average of 18 months to reach a final close, the same as in the past three years, demonstrating that fundraising remains a long process for many firms.
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By GlobalData"The debt fund market has seen significant growth in recent years. 2014 saw a record amount of capital raised for funds targeting real estate debt opportunities, and is up 30% on the previous year.
"While the availability of bank financing for real estate investments has substantially improved in recent years, there remains demand for alternative lenders, and the strong fundraising for real estate debt funds suggests that there also remains significant institutional demand for exposure to real estate debt investments.
"Across the entire real estate fundraising market, it is evident that investors are still putting considerable sums of capital to work across the asset class. Total fundraising for 2014 is set to exceed the amount raised in 2013, and we anticipate 2015 to also be strong.
"The number of funds receiving capital has taken a notable drop, however, as investors seek out the more experienced managers with long track records. Fundraising going forward is expected to remain highly competitive, with the investor base becoming more selective about the managers they choose to invest with."
Andrew Moylan, Head of Real Assets Products.
