GLOBAL - Private equity real estate funds are finding it tough to reaching closing fund-raising positions and almost as many as last year have already abandoned the task, according to research conducted by Preqin.
Details of its quarterly PERE study found 22 funds managed to hold a final close on fund-raising in the first quarter of this year and in turn raised $13bn (€9.79bn) - the lowest level seen since Q4 2004 when 45 funds raised $10bn.
As another indicator of just how tough conditions are for raising money through institutional investors, there have already been 14 confirmed cases of fundraisings being abandoned, against 17 in 2008 and 12 in 2007, said Preqin.
This is even though the number of funds ‘on the road' actually increased in the first three months of this year, according to the alternative assets information house, albeit the sum of money now being raised by individual funds is now smaller because so many investment houses are chasing the same investors.
It is for this reason that fund managers will find it increasingly difficult to reach closing targets, suggested Preqin, and are therefore extending deadlines to achieve higher fundraisings at a later date.
There are currently 390 funds looking for assets from investors at present, and 142 of those have raised $82.5bn at an interim close of the $227bn being sought.
At least 13 of the 22 funds closing in Q1 with $9.7bn were focused on the US real estate market, although a quarter are able to make investments elsewhere across the globe, while seven funds with assets of $3bn are focused on European investments and the remaining two funds had an aggregated $300m to invest in Asia and the rest of the world.
Interestingly, approximately $7.6bn of the $13bn will be invested in debt and distressed real estate and "there is a sense that investors will still commit to private equity real estate funds over the next 12 months", even though "fundraising conditions will be tougher", according to Ignatius Fogarty, spokesman for the Preqin.