Nearly $4.3bn has been raised by private equity real estate funds focusing solely on the West Coast since the start of 2013, compared to $2.6bn throughout 2011 and 2012, according to Preqin.
In recent years there has been a clear upward trend in fund managers successfully attracting more capital for West Coast-focused vehicles, with the aggregate capital raised by these funds increasing year on year from $0.8bn raised by 11 funds closed in 2011 to $2.7bn raised by 18 funds closed in 2013. 2014 so far has seen 11 West Coast-focused private real estate funds reach a final close, having raised an aggregate $1.6bn in capital commitments.
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Private Real Estate Fundraising Key Facts:
- 18 private real estate funds focused on the West Coast closed in 2013 raising an aggregate $2.7bn, the highest amount of capital raised by West Coast-focused real estate funds in any year in the period from 2007 to date.
- $1.6bn has been raised by West Coast-focused real estate funds closed so far during 2014, accounting for 41% of capital secured by US regionally-focused funds. This proportion has increased each year since 2007 when it represented just 2%.
- A significant 76% of West Coast-focused real estate funds closed from 2013 to October 2014 have met or exceed their fundraising targets, compared to 38% that closed between 2011 and 2012.
- 85% of West Coast-based managers stated that competition for value added/opportunistic assets had increased, while 58% said so for core assets, demonstrating the challenging environment fund managers face at present.
- 46% of West Coast-based real estate fund managers expect to deploy more capital in the year ahead compared to the last 12 months, while 46% plan to invest the same amount of capital.
- 22 West Coast-focused real estate funds are currently in market seeking an aggregate $3.5bn, compared to 19 funds and $3.7bn as of October 2013.
- Almost a third (32%) of West Coast-based real estate investors have assets under management of more than $1bn.
- On average, West Coast-based investors are under-allocated to the real estate asset class. These investors maintain an average target allocation of 9% of total assets to real estate and an average current allocation of 8%, suggesting that they are likely to place more capital in the asset class in the coming year.
Andrew Moylan, head of real assets products at Preqin, said: "There has been a notable increase in the amount of capital raised by managers with a specific focus on the US West Coast, reflecting both the increased appetite for exposure to markets on the West Coast, and a preference for specialist managers.
"When investing with smaller managers, institutional investors will typically want to see a firm with proven expertise investing in a particular market. This creates an opportunity for the 290 West Coast-based fund managers, but with these firms seeing an increase in competition for investor capital, raising capital will be difficult for most.
"Fund managers are confident in their ability to put capital to work, but with the vast majority seeing more competition for assets than a year ago, securing investments that can generate attractive returns for their investors is also likely to be challenging."
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