Institutional capital continues to favor large real estate funds sponsored by proven investment managers. Funds that closed during the first half of 2014 totaled approximately $40 billion, according to preliminary data from the Institutional Real Estate FundTracker database. Of that first-half total, 11 mega-funds ($1 billion plus) accounted for roughly 60 percent of the equity raised.
The largest fund to close during the first half of the year was The Blackstone Group’s Blackstone Real Estate Partners Europe IV, which topped $7 billion. Runners-up included PIMCO’s Bank Recapitalization and Value Opportunities Fund II ($5.5 billion), GI Partners’ GI Partners Fund IV ($2 billion) and Kildare Partners Kildare European Partners I ($2 billion).
The good news for smaller and medium-sized fund sponsors is that nearly 40 other funds (raising less than $1 billion each) closed during the first six months of the year. In addition, investors are now spreading more capital to funds focused on recovering European markets and higher risk/higher return value-add and opportunistic strategies in the United States.
However, it looks like the parade of mega-funds will continue in the coming months. Several of the more notable funds currently raising capital include Lone Star Funds’ Lone Star Fund IX, which is seeking to raise $7 billion; The Carlyle Group’s Carlyle Realty Partners VII, which has a goal of $4 billion; TPG Capital’s TPG Real Estate II, which is targeting $2 billion; and Shorenstein Properties’ Shorenstein Realty Investors Eleven, which is seeking $1.5 billion.
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Larry Gray is editorial director of Institutional Real Estate, Inc.
