Capital, everyone will tell you, is not hard to come by right now. According to capital-raising agents, the global real estate market probably has more investors looking to inject equity than at any time in their memories.
The rush of capital into the market, though, has not benefitted every professional investor equally.
Whereas fund managers such as Tristan can raise considerable amounts, less prominent funds have struggled to get funds off the ground.
According to Will Rowson, partner at advisory firm Hodes Weill: “You have some real pinch points going on in the market, particularity in the value-add space in Europe, where there are four or five outperformers who can raise very quickly and tend to be very well prepared.
“Then you have the next layer down, where it becomes harder, where the track record perhaps isn’t as strong.”
In part, says Wences Bunge, global co-head of real estate group at Credit Suisse, this is the result of a change of strategy among investors since 2008.
“The likes of ADIA used to have more than 300 platforms that they invested in and they looked to reduce that significantly, because part of the problem for them was that they couldn’t control so many small investments.”
In addition, investors, or limited partners, have since 2008 been more careful about how funds earn their returns.
Alex Hurst, a principal at placement agents Atlantic Pacific Capital, says: “Limited partners are particularly mindful at this stage of the cycle to back managers that are not reliant upon ‘leveraged beta’ and indiscriminate market-driven yield compression to generate returns. It’s about pricing discipline, prudent leverage, avoiding liquidity traps and alpha generation through net operating income growth, asset improvement and unlocking highest and best use.”
The change in strategy makes attracting institutional investors much harder for smaller funds without a strong track record. Instead, those smaller funds are turning to individual, high-net-worth investors, who tend to invest in smaller amounts.
However, the issue that affects both smaller and larger funds is the management of expectations among investors.
According to Rowson, investors are now much more aware of the perils of the real estate market than they were pre-crisis. Many, he says, are beginning to think about where we are in the cycle and how much of their capital will actually be deployed.
For the top-performing managers, this leaves an interesting dilemma: should they now be managing expectations of how much they can successfully deploy?
Rowson thinks they should, because if not, “they are just setting themselves up for a fall”.
Investors have no shortage of new funds coming through from the teams with the strongest record. Here are just eight of the largest in the market right now.
1. Brockton Capital
Brockton Capital Fund III, its third standalone real estate fund, was launched in 2014 with an original target of £850m. It raised £128m on its first close in August 2014, according to data provider Bison. The fund is expected to reach its target and close the fund by the end of December 2015.
Brockton’s previous fund raised £500m in 2010, all of which it has deployed.
The company is headed by ex-Blackstone fund manager David Marks and Jason Blank, previously of Merrill Lynch.
Purely a real estate private equity firm, Brockton traditionally invests using a value-add strategy, and the next fund is expected to use the same strategy.
2. Benson Elliot
The real estate private equity company achieved a first close of around £95m on its Benson Elliot Real Estate Partners IV fund in February 2015.
The fund is expected to achieve its final close sometime this month, hitting a target of around £450m.
The company was founded in 2006 and raised its first £250m fund the same year.
Focusing on value-add investments across Europe, the company last raised cash for Fund III in 2010. The fund secured around £350m at final close.
3. Angelo, Gordon & Co
The global private equity firm is currently raising four real estate
funds, including its ninth US-only fund, which is targeting more than $1.3bn (£858m).
In Europe, the business achieved a first close of £375m in March this year on its AG Europe Realty Fund. The initial target was said to be only £400m but is now expected to be higher when the fund closes out before the end of 2015.
This is the first stand-alone European fund from Angelo Gordon. The firm’s previous funds were dedicated to a co-investment structure. The last of these closed out in 2014 at an undisclosed size.
4. Harbert Management Corporation
Harbert started raising its fourth European fund in April 2015 with a first close of £150m. The Harbert European Real Estate Fund IV is aiming at a cap of around £550m.
The Alabama-based private equity firm has been investing in European real estate since 2002 when it raised the first in the current series of funds.
It last raised in 2010, closing out the fund with a total of around £170m, almost as much as it had achieved on this first close.
The fund invests using a value-add strategy across Europe in asset classes ranging from residential to light industrial.
5. Patron Capital
Founded by Keith Breslauer in 1999, the London-based firm is now back fund raising for the fifth time.
Patron Capital V launched in late 2014 looking to raise £800m by the end of 2015. The fund achieved a first close of £190m in July this year, according to its listing in Jersey.
As the vehicle of one of the best-performing fund managers of recent times, Patron Capital V is expected to achieve final close ahead of target, possibly before the end of October.
The previous fund raised around £600m when it closed in 2012. Since then it has invested in direct and indirect distressed real estate, including house building firm CALA.
6. Perella Weinberg Partners
Perella Weinberg is currently in the last few months of raising for its third European Real estate fund, which looks to be every bit as huge as previous funds in the family.
The fund is believed to be targeting an initial £1.5bn with the possibility of exceeding that if investor demand is there.
The company last came to the market in 2013, raising over €1.3bn (£950m) and was successful in raising €1.2bn during 2008, when the market was arguably at its lowest ebb.
Headed by ex-Unibail chief executive Leon Bressler, Perella Weinberg’s real estate funds invest opportunistically, across hard assets and debt.
7. Rockspring
Rockspring raised more than €700m (£515m) for its last fund in 2012 and is looking to follow up that success with its latest offering.
The Rockspring TransEuropean property Fund VI is this time aiming at a lower target of about €400m.
The fund was believed to have had a first close sometime towards the end of 2014 and is well on track to close sometime before Christmas.
The business has been involved in real estate for more than 30 years and invests for third parties as well as for its own investors. The new fund will join its UK fund and separate core investment funds in the market.
8. Meyer Bergman
Following the success of the UK-based private equity firm’s first two funds, the company is expected to announce the close of its third fund by the end of the month.
The Meyer Bergman European Retail Partners III fund is expected to achieve its target of £750m and perhaps a little more.
Headed by founder Markus Miejer, the business is unusual for a private equity fund in that it focuses on only one sector, retail.
It last came to the market in 2013 seeking £500m for Fund II but finally achieved £525m before closing the fund for new capital.
