Opportunistic property fundraising continues in face of crisis

Despite the credit crisis and faltering economic growth, opportunistic real estate investment managers continue to attract capital, with some 187 funds seeking to raise $155 bn (EUR121 bn) in the third quarter, according to research from US-based real estate fund of funds manager Clerestory Capital Partners. 'Lots of real estate fund managers see potential once-in-a-lifetime investment opportunities coming,' Clerestory principal and co-founder Tommy Brown commented.

However, Brown claims capital-raising has slowed considerably in recent months: ' Anecdotal evidence suggests it’s only some well-established managers who have raised their target equity amounts quickly from existing investors. Many managers appear to have struggled to close a third or half of their anticipated equity raises, and some may become distressed targets themselves, especially if they are facing issues such as eroding loan-to-value ratios or debt coming due.'

Clerestory’s update on the real estate opportunity funds universe, carried out in August and September, identified 140 small-cap (SC) opportunistic funds seeking to raise approximately $65 bn in capital. A total of 47 large-cap (LC) funds seeking to raise $90 bn in capital were identified. Clerestory defines SC-Opportunistic funds as those raising less than $1 bn of equity and LC-Opportunistic as those raising more than $1 bn.

Some 47 small-cap and 20 large-cap opportunistic funds representing $64 bn in equity had their final close during the past six months. The small-cap funds in the market tend to be first-time or second-time vehicles, which are more regionally focused. According to Clerestory, large-cap funds have also become more regional over the past year.