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Euro Funds on the Rise

July 11, 2017

New statistics from PERE Research & Analytics revealed Europe-focused, closed-ended private real estate fundraising escalated to account for 39% of the roughly $48 billion total capital raised.  Q2 showed a huge increase in activity compared to the dormant Q1. Only 9% of the $19.57 billion raised during Q1 included European strategies. More recently, in Q2, multiple $1 billion plus fundraises in the region have accumulated to $18.71 billion.

The New York based Blackstone Real Estate Partners Europe V has played a record-breaking role in their European opportunistic offering, closing out last month with $8.87 billion. Additionally, Orion Capital Managers and Kildare Partners also held $1 billion-plus closes on European opportunistic strategies. Similarly, PGIM Real Estate's sixth mezzanine real estate debt fund garnered $1.3 billion.

A major world player, Carlyle Group, is planning on re-entering private real estate capital markets after nearly a decade of being away. This will be the fourth opportunity fund for investments in Europe this year. The previous fund, Carlyle Europe Real Estate Partners III (CEREP III), had in Europe was in 2008, prior to the financial crisis, and raised 2.2 billion Euro in equity from institutional investors.

The group has undergone a rebranding to Carlyle Realty Europe. Additionally, significant personnel changes allow the vehicle's identity to be more in line with its US counterparts. For their fourth fund, they will be setting their target to much lower to around 1 billion Euro. Senior Managing Director, Peter Stoll, who joined in 2015, mentioned "our dialogue with investors has now shifted to what's next [and] what's new."

Nonetheless, the most popular strategy taking 49% share of the total continued to be a North-America focused fund. Cerberus Capital Management's latest instrument “ Cerberus Institutional Real Estate Partners IV“ has gathered $1.8 billion nearing their $2 billion target.

Global and Asia-Pacific (APAC) strategies accounted for 8 percent of the capital raised this year, compared to global funds taking 33% share, North America 32%, Europe 21%, and APAC with 13% first half (H1) year over year. Specifically, "[d]omestic demand in Europe is the driving force of recent economic growth" encouraging investors to take advantage of the profit opportunities stated Keith Knutsson of Integrale Advisors.

Compared to the 127 funds that closed H1 2016, H1 2017 saw a significant decline with only 84 closing. Although, "the average fund size trended upwards from $504.21 million in H1 2016, to $545.32 million in the first half of this year" according to PERE. Despite the increase in average fund size the overall global real estate fundraising continues to decline. The combined number funds closed in 2016 was the lowest in eight years, and the combined capital raised was at a five-year low. A modest $120.97 billion was raised for 214 funds in 2016 compared to the tally of $143.85 billion raised for 253 funds in 2015.

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