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Tuesday, 07 January 2014

Push for Large Investment Funds to Threaten Small Managers

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Commercial Real Estate Direct Staff Report

Real estate investment funds are growing in size and decreasing in numbers in a trend that may not bode well for first-time fund managers, according to investment-fund research firm Preqin.

The London research firm's latest results on real estate fund-raising indicates that emerging investment managers will face more difficulty raising equity.

A total of 108 real estate funds targeting investments in geographic areas that include North America closed their marketing last year and raised an average of $491 million of equity commitments. That compares with a year earlier, when 127 similar funds raised an average of $339 million, or 45 percent more than funds raised last year.

Among all real estate funds, 162 closed in 2013 and raised an average of $511 million. That compares with 223 that closed a year earlier, raising an average of $332 million, or 54 percent less.

First-time fund managers accounted for 7 percent of the equity raised last year, with 93 percent of the equity being raised by experienced and larger fund managers.

"We'll continue to see a handful of larger players account for a large proportion of fund raising, as institutional investors are increasingly looking at managers with long track records, ahead of first-time or emerging fund managers," said Andrew Moylan, head of real asset products for Preqin, which has satellite offices in New York, San Francisco and Singapore.

A separate study of real estate investment funds conducted by Private Equity International found that the average size of funds that closed last year increased 26 percent to $498 million. However its study was of a smaller universe of 199 funds worldwide.

Preqin, meanwhile, expects to see funds with higher risk value-add or opportunistic investment strategies become more prevalent. Funds with opportunistic strategies accounted for 46 percent of the total equity raised last year.

Of the 451 closed-end funds that were in the market raising capital this month, 289 were pursuing opportunistic or value-add strategies.

Value-add and opportunistic strategies involve buying loans or properties with performance issues, with plans to improve them.

Debt-investment strategies are a focal point of three of the five largest real estate funds with a United States investment focus that closed last year. They are Lone Star Funds' Lone Star Real Estate Fund III, and Lone Star Fund VIII, which raised $7 billion and $5 billion, respectively, to be invested in the U.S. and some foreign markets; and Blackstone Group's Blackstone Real Estate Debt Strategies II, which raised $3.5 billion to be invested in the U.S. and Europe

Largest Funds with U.S. Targets to Close in 2013



Target Markets

Amt Raised $mln

Lone Star Real Estate Fund III

Lone Star

U.S., Global


Lone Star Fund VIIl

Lone Star

U.S., Japan, Europe


Brookfield Strategic Real Estate Partners

Brookfield Asset Management

U.S., Global


Starwood Distressed Opportunity Fund IX

Starwood Capital Group2.6

U.S., Global


Blackstone Real Estate Debt Strategies II

Blackstone Group

U.S., Europe


Rockpoint Real Estate Fund IV

Rockpoint Group

U.S., England, Japan


TA Realty Associates X

TA Associates Realty



KKR Real Estate Partners Americas




Cerberus institutional Real Estate Partners Series Three

Cerberus Capital Management

U.S., Europe


Rialto Real Estate Fund II

Rialto Capital Management



Source: Preqin

Comments? E-mail John Covaleski or call him at (215) 504-2860, Ext. 208.


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Data Digest







Top Bookrunners Domestic, Private-Label CMBS - 2017
Investment Bank #Deals Vol$mln MktShr%
Goldman Sachs 17.59 11,819.34 13.68
JPMorgan Securities 14.52 10,968.11 12.70
Citigroup 12.04 10,012.71 11.59
Wells Fargo Securities 14.02 9,936.06 11.50
Deutsche Bank 12.55 9,879.74 11.44




cppichart FP



CMBS 2.0 Spreads


Top CMBS Loan Contributors - 2017
Lender #Loans Vol$mln MktShr%
Goldman Sachs 146.89 11,719.34 13.63
JPMorgan Chase Bank 117.68 10,114.14 11.76
Deutsche Bank 198.48 9,689.97 11.27
Morgan Stanley 166.18 8,539.78 9.93
Citigroup 199.05 8,088.24 9.41





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