In order to establish and maintain good investor relations, managers must understand the difference between investor communities in different regions. Anne Gales and Ulises Flores report

CB Richard Ellis analysed the global fund real estate market and came to the conclusion that 68% of the limited partners are based in the US, 24% in Europe and 8% in the Middle East and other regions. Although it is difficult to make generalisations, there are some differences worth noting between LPs in these three locations.
US limited partners are mature, large, sophisticated, with increased allocations for opportunistic and international funds. US institutions, such as public pensions, foundations, endowments, corporate pensions and Taft-Hartley plans (labour unions' pension plans) are characterised by their established real estate portfolios. It is common for these institutions to invest via closed-end commingled funds. These funds offer an efficient way of building a diversified real estate portfolio, since the asset class is considered to be an attractive surrogate to fixed-income and a good hedge against inflation. Recent declines in US stock values have forced some US institutions to decrease allocations due to the shrinking valuation of their overall plans (denominator effect). However, we anticipate an increase in real estate allocations in 2008, bringing total allocations up to 9.6% from 8.7% in 2007.  
US LPs have for the most part reached their large target real estate allocations on core/core-plus, value-add and REITs managers and are tempering new US real estate commitments in favour of niche, opportunistic and international investment strategies. To find these opportunistic and international relationships, US LPs are open to reviewing first time fund managers.
US LPs seeking above average returns to augment their established real estate portfolios are venturing to emerging markets and more developed regions like Western Europe. They view Western European countries as stable and investor friendly, but also highly fragmented and undergoing a period of transition from owner-occupied or direct ownership towards professional real estate management. 
While consultants and gatekeepers can be crucial to raising money in the US, getting their recommendation can be a long and detailed process, which actually may benefit those raising larger funds.  
European limited partners: not as mature as US portfolios, catching up and increasing allocations to all real estate food groups, conservative approach, less opportunistic focus, tax structuring is key
Appetite and investment focus for European LPs vary from those with highly sophisticated programmes to those with virtually no real estate fund investments, that would like to increase their exposure. Based on the most recent INREV Investment Survey (sample holds €104bn of global real estate), 82% of European LPs will significantly increase their allocations to close-end real estate funds. Europe is currently a good market to establish new relationships, with a particular emphasis on core and value-add strategies.
Following Dutch pension funds, countries like Denmark, Finland and Ireland with centralised pension funds have moved to diversify their portfolios from direct real estate to commingled funds.  The UK, Sweden and Norway have plans to invest in closed-end real estate funds for diversification purposes. Larger countries such as France, Germany and Norway are not heavily invested in fund vehicles. When investors look to allocate either outside their home country or to pursue more complex strategies, they may be inclined to do so initially through a fund of funds vehicle.
Europe has also seen the resurgence of established pan-European and Global funds focusing on the region, and many European LPs take comfort in investing with large recognised global franchises.  The diversified and large global allocator model is still in favour in Europe.  
Geographically, LPs are interested in western Europe, particularly Germany and France, although Central and Eastern Europe have also become attractive. European LPs have until recently considered the US market somewhat overpriced despite having strong fundamentals. The weakened US dollar, current deleveraging of the US financial system and the repricing of risk offers European investors a unique buying opportunity in a market desperate to fill capital gaps. To achieve their required return profile when investing in the US, investors will need to seek expert legal advice on the impact of US tax legislation on structuring (FIRPTA and ECI etc.) and the usefulness of domestically controlled REITs, special vehicles, and off-shore structures.
Middle Eastern limited partners have considerable un-invested capital, relationship driven, brand names, current income beneficial, prefers co-invest model or direct ownership. Capital available in the Middle East for real estate is vast. According to data provided by the daily Asharq al-Awsat, $140bn was invested globally between 2004 and 2007. We expect the trend to continue, but it is important to understand that Middle Eastern investors prefer direct ownership in landmark assets. When considering allocating to fund managers, investors like to see other brand-name sophisticated investors in earlier closes and will generally come in at later part of the fund raise. An active co-invest clause is key in the decision making process. All the investment styles are of interest, but we see preference for core and value-add with pre-seeded portfolios and current income. In terms of geographic focus, Middle Eastern investors are open minded, but overall are attracted to Europe. Similar to European investors, tax efficient structures are becoming very important to Middle Eastern investors.
In conclusion, there are large and growing pools of institutional capital available for today's private equity real estate manager to target in the US, Europe and the Middle East markets. By following a few straightforward guidelines and understanding the cultural and structural variations between each market, a fund manager can greatly improve their likelihood of accomplishing a successful fundraise.