European real estate bucked the trend as private equity real estate managers cut their investment activity globally in the first quarter of 2017.

Europe outperforms as global PE property dealing flags in Q1

The PE community reduced its real estate investment both in terms of the number of transactions and aggregate value of transactions in the first three months of 2017, according to the latest report from Preqin, a data provider on the alternative asset sector.

In total, 568 deals were completed for a combined $38 bn (€35 bn), although Preqin expects these figures to rise by up to 10% as more information becomes available. This marks a 33% decrease on the 853 deals, totalling $57 bn, completed in the fourth quarter of Q4 2016 and represents the lowest aggregate deal value since Q1 2014, as the amount of capital deployed by fund managers declined from the level seen in recent quarters.

The findings for Q1 are notable as in surveys conducted by Preqin at the end of 2016 two-thirds of real estate firms stated that they intend to deploy more capital over the next 12 months than the previous year.

Europe
Deal flow in Europe was robust over Q1 with 205 transactions worth a combined $15 bn, the highest aggregate total since Q1 2016. There were 346 deals in North America for $20 bn, eight deals in Asia for $1.6 bn and 17 transactions in all other regions worth a total of $1.3 bn.

The largest amount of capital was invested in office assets, which accounted for 39% of aggregate deal value in Q1 2017, in line with recent quarters. The proportion of capital committed to residential properties halved to 10% in Q1 2017, down from 20% in Q4 2016, with industrial and retail both increasing over the period. The 10 largest private equity real estate deals completed in Q1 2017 were worth $8.6 bn and accounted for 22% of the aggregate deal value.

Dry powder
Fund managers currently hold a record $247 bn of capital available to invest in real estate assets, up $10 bn from the end of 2016.

Andy Moylan, head of real estate products at Preqin, said: 'Despite holding record levels of dry powder, private equity real estate fund managers reduced their deal activity in Q1 2017 in comparison with recent quarters. The number of completed transactions was around a third lower than the previous quarter while North America suffered a notable downtick in deals completed.

'Competition for assets and high valuations are not creating a conducive market for fund managers to deploy capital, with firms having to work harder to find attractive opportunities that offer the prospect of generating attractive returns. Fund managers stated at the end of 2016 that they intended to ramp up their investment over the course of 2017, so we may see deal activity pick up over the remainder of the year despite the challenges fund managers face finding value today.'

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APR 26

Real Estate Private Equity

UBS Asset Management - Atrium, 7th Floor, 5 Broadgate, London, EC2M 2QS, United Kingdom

08:00 - 11:00

Extra places made available.

For the first time, PropertyEU has organised a private equity real estate event examining the European market.

Hear from Ric Lewis, Chief Executive and Chairman of Tristan Capital Partners, as he delivers a TED-style talk followed by an interview on the realities of investing in 2017.

Joining him are Thomas Wels, Head of Real Estate and Private Markets at UBS Asset Management, plus two prominent investor-consultants: Paul Richards, Head of European Real Estate at Mercer and Paul Jayasingha of Willis Towers Watson.

Highlights include: