The fundraising environment remains extremely competitive for private equity real estate funds as the recovery many predicted is yet to occur, according to fund tracking firm Preqin.
The fundraising environment remains extremely competitive for private equity real estate funds as the recovery many predicted is yet to occur, according to fund tracking firm Preqin.
The $7.3 bn (EUR 5.6 bn) raised by 20 private equity real estate funds in the second quarter of 2010 was the lowest amount of capital raised by the
industry since the third quarter of 2004 when 30 funds raised an aggregate $6.1 bn, Preqin said.
As a result of the difficult conditions, the aggregate target of private equity real estate funds in market has fallen significantly from $228 mln in Q1 2009 to $134 mln in Q3 2010. Many fund managers have reduced their fundraising targets, while others have been forced to abandon their efforts altogether, Preqin said.
The time it is taking fund managers to close funds reflects the competitiveness within the fundraising market. Funds which have closed in 2010 spent an average of 19.7 months in market. In comparison funds which closed in 2006 spent, on average, less than 10 months in market.
'The low fundraising total for Q2 2010 confirms that private equity real estate fundraising remains extremely competitive, with fund managers taking over a year and a half to close their funds. While the aggregate target of funds in market has fallen, there is still a large number of funds on the road seeking commitments from an investor community which remains far less active than it was a few years ago,' commented Andrew Moylan, manager - real estate data at Preqin.
'Preqin has found that most institutions do plan to increase their activity in the second half of 2010, but many have significant amounts of capital committed to existing funds and are receiving very few distributions to re-invest. With real estate transactions increasing, more investors will receive distributions, which will in turn lead to increased activity in the fundraising market. This will take time however, and it seems likely that there will be several more quarters of slow fundraising to come,' Moylan added.
