Private real estate assets reach all-time high of USD740bn
Global assets under management* of the private real estate industry have reached USD742bn, an all-time high for the industry, and up from USD697bn as of the end of 2013. Preqin’s Andrew Moylan takes a look at the latest stats on the industry.
Preqin’s latest research shows the private equity real estate industry continued to grow in 2014. The aggregate assets under management (AUM) of closed-end private real estate funds stands at USD742bn as of June 2014, an increase of USD45bn since December 2013. Total AUM has increased by 63% since December 2010, with a large proportion of this growth accounted for by the increase in the value of real estate assets still being held by fund managers. The value of the assets held by managers has risen from USD314bn in 2010 to USD567bn in 2014.
This increase in private real estate fund managers’ portfolios can be attributed to the improving real estate valuations and increased investment activity by these firms. The improvement in fundraising in recent quarters also means that fund managers now have large amounts of dry powder, the amount of uncalled capital available, with which to make new investments. Global private real estate dry powder stood at USD175bn as of June 2014.
In 2013, USD138bn of capital was distributed back to investors in private real estate funds, more than double the USD67bn returned in 2012, indicating that many managers have seen recent quarters as a good time to sell assets. The return of previously tied-up capital to investors may prove positive for private real estate fundraising in future months, as investors look to re-invest the capital in new real estate funds.
Over the course of 2014, Europe-focused funds have significantly increased their share of the fundraising market at the expense of North America-focused funds. There has been a 153% increase in the amount of capital raised by Europe-focused funds closed in 2014 (January to November) compared to funds closed during the same period in 2013. Meanwhile, the percentage of capital raised by North America-focused funds in 2014 has fallen by 27% compared to the same period in 2013.
Furthermore, the largest real estate fund closed so far this year is focused on investments in the European market; Blackstone Real Estate Partners Europe IV closed at EUR7.2bn.
There has been a sizeable increase in the assets under management of the private equity real estate industry, driven by consistent increases in the value of real estate holdings and a much improved fundraising market. While the performance of real estate funds is much improved as a result, and investors are now seeing significant distributions from their existing investments as managers exit assets, there will be concerns about whether there are sufficient attractive opportunities for this capital to be re-invested, and what impact the high pricing will have on future returns for the asset class.
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*Preqin defines a firm’s assets under management as the sum of its dry powder and unrealized value of portfolio assets.