The 216 Preqin Quarterly Update Real Estate Insight on the quarter from the leading provider of alternative assets data Content includes... Fundraising Smallest number of funds closed in a single quarter since 21. Funds in Market Number of funds in market at an all-time high. Dry Powder Real estate dry powder reaches a record $23bn. Investors in Private Real Estate Appetite for value added strategies increases. Fund Performance PrEQIn Real Estate Index has seen continued growth over the past 16 quarters. alternative assets. intelligent data.
The Preqin Quarterly Update: Real Estate, 216 Download the data pack at: Foreword - Andy Moylan, Preqin Fundraising remained relatively strong in 216, with 44 funds closed securing $21bn, the same amount as was raised in Q4 215. However, this is a 48% decrease in capital raised compared with the post-gfc high of $41bn raised in Q3 215. It is still the largest real estate fi rms that dominate the market: two-thirds of total capital raised came from the top 1 largest funds to close in. With dry powder continuing to rise to record levels ($23bn), there are still concerns that real estate in some markets may be overpriced. With continued demand for real estate and the resulting increase in valuations, the performance of the asset class has remained strong. Closed-end private real estate funds have posted positive average changes in NAV for 21 consecutive quarters, and the PrEQIn All Real Estate Index has shown continued growth, nearing the peak seen in 28. The fundraising slowdown seen in Q4 215 and 216 compared with the capital raised in Q2 and Q3 215 could be a refl ection of unease among investors regarding real estate s prospects in the coming quarters. Fund managers could therefore continue to fi nd fundraising challenging throughout 216, with a record 492 funds currently seeking capital. Preqin s Real Estate Online is an indispensable tool for all fi rms looking to market funds, develop new business or fi nd new partners in the coming months. Behind every data point in this report is a wealth of individual fi rm- and fund-level data available on Preqin s leading online services. We hope you fi nd this report useful, and welcome any feedback you may have. For more information, please visit www.preqin.com or contact info@preqin.com. Key Facts: 216 492 Number of private real estate funds currently in market, an all-time high. 46% Proportion of investors planning to commit $1mn or more to private real estate funds in the next 12 months. 66% Proportion of total capital raised by the top 1 largest private real estate funds closed this quarter. $23bn Amount of dry powder held in private real estate funds, an all-time high. $3.3bn Amount of capital raised by Rockpoint Real Estate Fund V, the largest private real estate fund to close in 216. 21 Number of North Americafocused private real estate funds closed in, compared with 14 in Europe and seven in Asia. All rights reserved. The entire contents of Preqin Quarterly Update: Real Estate, 216 are the Copyright of Preqin Ltd. No part of this publication or any information contained in it may be copied, transmitted by any electronic means, or stored in any electronic or other data storage medium, or printed or published in any document, report or publication, without the express prior written approval of Preqin Ltd. The information presented in Preqin Quarterly Update: Real Estate, 216 is for information purposes only and does not constitute and should not be construed as a solicitation or other offer, or recommendation to acquire or dispose of any investment or to engage in any other transaction, or as advice of any nature whatsoever. If the reader seeks advice rather than information then he should seek an independent fi nancial advisor and hereby agrees that he will not hold Preqin Ltd. responsible in law or equity for any decisions of whatever nature the reader makes or refrains from making following its use of Preqin Quarterly Update: Real Estate, 216. While reasonable efforts have been made to obtain information from sources that are believed to be accurate, and to confi rm the accuracy of such information wherever possible, Preqin Ltd. does not make any representation or warranty that the information or opinions contained in Preqin Quarterly Update: Real Estate, 216 are accurate, reliable, up-to-date or complete. Although every reasonable effort has been made to ensure the accuracy of this publication Preqin Ltd. does not accept any responsibility for any errors or omissions within Preqin Quarterly Update: Real Estate, 216 or for any expense or other loss alleged to have arisen in any way with a reader s use of this publication. 2 216 Preqin Ltd. / www.preqin.com
Download the data pack at: The Preqin Quarterly Update: Real Estate, 216 Contents Fundraising in 216 4 Funds in Market 6 Dry Powder 7 Institutional Investors in Private Real Estate 9 Fund Performance 1 Data Source: Preqin s Real Estate Online is the leading source of intelligence on the private real estate fund industry and contains details for all aspects of the asset class, including net-to-investor fund performance, fundraising information, institutional investor profi les, fund manager profi les and more. Constantly updated by our team of dedicated researchers, it represents the most comprehensive source of industry intelligence available today, with global coverage and a wide variety of information included. For more information, or to arrange a demo, please visit: www.preqin.com/reo
The Preqin Quarterly Update: Real Estate, 216 Download the data pack at: Fundraising in 216 While 216 saw the smallest number (44) of funds closed in a single quarter since 21, the $21bn raised is the same amount as was secured in Q4 215 (Fig. 1). Indicative of capital concentration among the largest real estate firms, the 1 largest funds to reach a fi nal close this quarter accounted for two-thirds ($14bn) of the total capital raised; consequently, the average size of the remaining 34 funds was only $22mn. North America-focused vehicles have continued to dominate fundraising, with 48% of funds closed and over half the capital raised in targeting the region (Fig. 2). Europe-focused funds have raised $1.6bn more than in Q4 215, representing 35% of the aggregate capital raised globally in 216. There continues to be strong demand for higher risk strategies, with 82% of the capital raised directed to value added and opportunistic funds (Fig. 3). The average time taken for funds to reach a fi nal close in 216 remained the same as in 215, at 18 months (Fig. 4). Despite the limited number of funds closing, fund managers have been more successful in achieving or surpassing their targets in 216 compared with the past few years, with just under two-thirds of funds closing at or above their target size (Fig. 5). Additionally, no funds closed in raised less than half of their initial target. Key Fundraising Facts: 216 $21bn Amount of capital raised by closed-end private real estate funds. 65% Proportion of funds closed that reached or exceeded their initial target size. 18 Months Average time spent in market by funds closed in 216. $3.3bn Capital raised by Rockpoint Real Estate Fund V, the largest fund to close in the quarter. Fig. 1: Global Quarterly Closed-End Private Real Estate Fundraising, 21-216 Fig. 2: Closed-End Private Real Estate Fundraising in 216 by Primary Geographic Focus 12 25 1 8 6 4 2 48 46 41 82 55 56 5 92 67 67 58 17 13 1 14 14 17 19 24 16 15 14 14 32 48 1 87 76 76 95 69 59 61 53 56 49 46 41 44 37 34 33 28 27 28 24 24 22 21 21 Q2 Q3 Q4 Q2 Q3 Q4 Q2 Q3 Q4 Q2 Q3 Q4 Q2 Q3 Q4 Q2 Q3 Q4 21 211 212 213 214 215 216 Date of Final Close No. of Funds Closed Aggregate Capital Raised ($bn) 2 15 1 5 21 11.7 North America 14 7.3 7 1.9 2.3 Europe Asia Rest of World No. of Funds Closed Aggregate Capital Raised ($bn) Primary Geographic Focus 4 216 Preqin Ltd. / www.preqin.com
Download the data pack at: The Preqin Quarterly Update: Real Estate, 216 Fig. 3: Closed-End Private Real Estate Fundraising in 216 by Primary Strategy Fig. 4: Average Time Taken for Closed-End Private Real Estate Funds to Achieve Final Close, 21-216 2 15 1 5 16 15 8.7 8.6 Value Added Opportunistic 7 Debt 2.8 2 2 1 1.2.2.1.6 Core Core-Plus Distressed Secondaries No. of Funds Closed Aggregate Capital Raised ($bn) Average Time Spent in Market (Months) 2 18 16 14 12 1 8 6 4 2 18 19 18 18 16 16 14 21 211 212 213 214 215 216 Primary Strategy Date of Final Close Fig. 5: Closed-End Private Real Estate Funds by Proportion of Target Size Achieved, 212-216 Proportion of Funds Closed 1% 9% 8% 7% 6% 5% 4% 3% 2% 1% % 1% 9% 19% 16% 27% 25% 24% 22% 26% 14% 27% 21% 13% 16% 11% 37% 35% 35% 41% 35% 13% 11% 7% 6% 212 213 214 215 216 125% or More 11-124% 1% 5-99% Less than 5% Data Source: Preqin s Real Estate Online contains detailed information on more than 5,3 private real estate funds. View which fund managers are currently on the road raising a private equity real estate fund or will be coming to market soon. Analyze fundraising over time by fund strategy, property type and location. For more information, or to arrange a demo, please visit: www.preqin.com/reo Date of Final Close Fig. 6: 1 Largest Closed-End Private Real Estate Funds Closed in 216 Fund Firm Fund Size (mn) Strategy Geographic Focus Rockpoint Real Estate Fund V Rockpoint Group 3,3 USD Distressed, Opportunistic, Value US, UK Added Westbrook Real Estate Fund X Westbrook Partners 2,85 USD Value Added Global PW Real Estate Fund III PW Real Assets 1,5 EUR Opportunistic West Europe AgFe Real Estate Senior Debt Floating Rate Fund AgFe 91 GBP Debt UK Brockton Capital III Brockton Capital 86 GBP Opportunistic, Value Added UK CBRE GIP European Value-Add Fund CBRE Global Investment Partners 84 USD Value Added Europe Cheyne Real Estate Credit Holdings III Cheyne Capital Management 77 USD Core and Debt Europe Invesco Real Estate Fund IV Invesco Real Estate 75 USD Value Added US GreenOak Asia II GreenOak Japan 65 USD Opportunistic, Value Added Japan IMT Capital Fund IV IMT Capital 63 USD Value Added US 216 Preqin Ltd. / www.preqin.com 5
The Preqin Quarterly Update: Real Estate, 216 Download the data pack at: Funds in Market Indicative of a competitive fundraising environment, the number of closed-end private real estate funds in market has reached a new record high in Q2 216, with 492 vehicles looking to raise $175bn (Fig. 1). The majority (59%) of funds in market are primarily targeting North America, with the region also representing 54% of the total targeted capital (Fig. 2). Europe-focused vehicles account for a fi fth of funds in market, followed by those targeting Asia (12%), with funds focused outside the aforementioned regions accounting for 9% of vehicles seeking capital. Fig. 1: Closed-End Private Real Estate Funds in Market over Time, 213 - Q2 216 6 5 4 3 448 438 453 466 467 468 466 478 47 423 429 451 489 492 As seen in Fig. 3, 61% of funds in market have been raising capital for over a year, up from 53% in 215, further illustrating the competitiveness of the fundraising market. Over a quarter (28%) of funds that have yet to hold an interim close have launched in the past six months, while 73% of vehicles that have held at least one interim close have been on the road for over a year. Blackstone Real Estate Partners Europe V, launched at the beginning of 216, is the largest fund in market at present, targeting 7bn for investment in distressed and opportunistic opportunities across Western Europe (Fig. 4). 2 1 149 15 16 163 163 164 165 165 163 164 153 155 174 175 Q2 Q3 Q4 Q2 Q3 Q4 Q2 Q3 Q4 Q2 213 214 215 216 No. of Funds Raising Aggregate Target Capital ($bn) Fig. 2: Closed-End Private Real Estate Funds in Market by Primary Geographic Focus Fig. 3: Closed-End Private Real Estate Funds in Market by Time Spent on the Road 35 1% 3 25 2 15 1 5 291 93.9 North America 98 5.6 58 18.8 45 11.3 Europe Asia Rest of World No. of Funds Raising Aggregate Target Capital ($bn) Primary Geographic Focus Proportion of Funds 9% 8% 7% 6% 5% 4% 3% 2% 1% % 27% 9% 25% 18% 21% All Funds 22% 2% 23% 25% 28% Funds Yet to Hold an Interim Close 31% 15% 27% 13% 15% Funds that Have Held at Least One Interim Close More than 24 Months 19-24 Months 13-18 Months 7-12 Months 6 Months or Less Fig. 4: Five Largest Closed-End Private Real Estate Funds Currently in Market Fund Firm Fund Size (mn) Strategy Geographic Focus Blackstone Real Estate Partners Europe V Brookfi eld Strategic Real Estate Partners II Oaktree Real Estate Opportunities Fund VII Hermes Real Estate Senior Debt Fund Cerberus Institutional Real Estate Partners IV Blackstone Group 7, EUR Distressed, Opportunistic Western Europe Brookfi eld Asset Management 7, USD Opportunistic Global Oaktree Capital Management 3, USD Debt, Distressed, Opportunistic Global Hermes Real Estate 1,5 GBP Debt UK Cerberus Real Estate Capital Management 1,5 USD CMBS, Distressed North America, Western Europe 6 216 Preqin Ltd. / www.preqin.com
Download the data pack at: The Preqin Quarterly Update: Real Estate, 216 Dry Powder Real estate dry powder continued to rise during of this year and now stands at a record $23bn, having increased by approximately $2bn since the end of 215 (Fig. 1). As seen in Fig. 2, funds primarily focused on investments in North America have the largest proportion (58%) of capital available and have witnessed faster growth than funds focused on any other region in recent years; dry powder has increased by 3% since December 214, more than Europe-focused (+5%) and Asia-focused (+4%) funds and funds focused elsewhere (-9%). Europe-focused funds currently hold $59bn (26% of estimated global real estate dry powder), while $28bn (12%) is available for opportunities in Asia and $1bn (4%) is held by funds focused outside the aforementioned regions. All private real estate strategies, with the exception of distressed real estate, have seen an increase in dry powder since the end of 215, with higher risk funds holding the majority (66%) of available capital (Fig. 3). Opportunistic vehicles have the highest amount of capital available at $97bn, followed by value added funds ($55bn). These amounts are signifi cantly higher than the lower risk strategies; closed-end core and core-plus vehicles hold $22bn and $12bn respectively. Fig. 2: Closed-End Private Real Estate Dry Powder by Fund Primary Geographic Focus, December 26 - March 216 Fig. 1: Closed-End Private Real Estate Dry Powder, December 26 - March 216 Dry Powder ($bn) 25 2 15 1 5 132 Dec-6 167 171 Dec-7 Dec-8 18 Dec-9 148 Dec-1 167 Dec-11 156 Dec-12 186 Dec-13 196 Dec-14 21 Dec-15 23 Mar-16 Fig. 3: Closed-End Private Real Estate Dry Powder by Strategy, December 26 - March 216 14 12 12 1 Core Dry Powder ($bn) 1 8 6 4 North America Europe Asia Rest of World Dry Powder ($bn) 8 6 4 Core-Plus Debt Distressed Opportunistic 2 2 Value Added Dec-6 Dec-7 Dec-8 Dec-9 Dec-1 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Mar-16 Dec-6 Dec-7 Dec-8 Dec-9 Dec-1 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Mar-16 Data Source: Preqin s Real Estate Online is the leading source of intelligence on the private real estate fund industry and contains details for all aspects of the asset class, including net-to-investor fund performance, fundraising information, institutional investor profi les, fund manager profi les and more. Constantly updated by our team of dedicated researchers, Real Estate Online represents the most comprehensive source of industry intelligence available today, with global coverage and a wide variety of information included. For more information, or to arrange a demonstration, please visit: www.preqin.com/reo 216 Preqin Ltd. / www.preqin.com 7
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Download the data pack at: The Preqin Quarterly Update: Real Estate, 216 Institutional Investors in Private Real Estate Exposure to value added strategies is widely targeted by institutional investors, with the majority (61%) of investors seeking new commitments to private real estate funds in the next 12 months targeting such vehicles a 1 percentage point increase from 215 (Fig. 1). Additionally, half of investors are looking to commit to opportunistic vehicles in the next 12 months, a similar proportion to the previous year. Indicative of investors preference for higher risk funds over the next year, appetite for core vehicles has dropped 15 percentage points compared with 215. There is strong demand for European real estate, with Europe surpassing North America as the preferred region for investment in the year ahead, having increased by 15 percentage points since 215 (Fig. 2). North America remains a target for 46% of investors, and just over a third of investors are looking to invest in the asset class globally in the coming year. In the next 12 months, over a third (36%) of investors committing to private real estate funds are planning to commit less than $5mn (Fig. 3). However, a signifi cant proportion (46%) of institutions expect to commit $1mn or more, including 13% looking to invest $3mn or more. Encouragingly, the majority (59%) of investors plan to make at least four commitments in the next 12 months (Fig. 4). Preqin Investor Outlook: Real Estate, H1 216 For more in-depth analysis on real estate investors, please see our Investor Outlook: Real Estate, H1 216, which contains detailed information on investors portfolios, future plans, confi dence in different asset classes, concerns for the future and more. www.preqin.com/investoroutlook Fig. 3: Amount of Capital Investors Plan to Commit to Private Real Estate Funds in the Next 12 Months Fig. 1: Strategies Targeted by Private Real Estate Investors in the Next 12 Months, 215 vs. 216 Proportion of Fund Searches 7% 6% 5% 4% 3% 2% 1% % 51% 61% Value Added 5% 47% Opportunistic 56% 41% Core 29% 27% Core-Plus 2% 16% Debt 13% 11% Distressed 215 216 Strategy Targeted Fig. 2: Regions Targeted by Private Real Estate Investors in the Next 12 Months, 215 vs. 216 Proportion of Fund Searches 6% 5% 4% 3% 2% 1% % 55% 46% North America 42% 57% Europe 28% 28% Asia-Pacific 8% 8% 9% 1% Rest of World Emerging Markets 28% 34% Global 215 216 Region Targeted Fig. 4: Number of Private Real Estate Funds Investors Plan to Commit to in the Next 12 Months 13% 7% 13% 36% Less than $5mn $5-99mn 1 Fund 2-3 Funds 33% $1-299mn 28% 4-9 Funds $3mn or More 52% 1 Funds or More 18% 216 Preqin Ltd. / www.preqin.com 9
The Preqin Quarterly Update: Real Estate, 216 Download the data pack at: Fund Performance Closed-end private real estate funds have experienced positive average changes in NAV for every quarter over the past fi ve years (Fig. 1). Furthermore, the PrEQIn Real Estate Index, which currently stands at 95.5 (rebased to 1 as of 31 December 27), has seen continued growth over the past 16 quarters (Fig. 2). With the exception of vintage years 25 and 26, more capital has been paid out or remains in fund portfolios than was initially invested (Fig. 3). It will be interesting to see whether funds investing at the time of the subprime mortgage crisis, which are nearing the end of their lifespans, will be able to distribute capital back to investors to the extent the median RVPI ratios suggest. Real estate was the worst performing strategy compared with other private capital strategies across the three-year periods between March 212 and March 213; however, in the three years to June 215 the horizon IRR for real estate was 15.9%, compared to buyout (+18.5%), venture capital (+17.%) and mezzanine (+12.8%). Funds of vintage years 28-213 are posting relatively strong returns; however, they are still yet to exceed those of earlier vintages (Fig. 5). Fig. 2: PrEQIn Index: Real Estate by Strategy Fig. 1: Closed-End Private Real Estate Quarterly Average Change in NAV, 21 - Q2 215 Average Change in NAV from Previous Quarter 8% 7% 6% 5% 4% 3% 2% 1%.2% % -1% -.4% 4.% 7.3% 4.5% 5.6% 2.5% 2.6% 2.3% 2.6% 2.6% 1.9% 1.5% 1.7% 3.9% 3.4% 1.3% 4.5% 4.4% 2.4% 2.3% 1.9% 21 Q2 21 Q3 21 Q4 21 211 Q2 211 Q3 211 Q4 211 212 Q2 212 Q3 212 Q4 212 213 Q2 213 Q3 213 Q4 213 214 Q2 214 Q3 214 Q4 214 215 Q2 215 Fig. 3: Closed-End Private Real Estate Funds: Median Called-up, Distributed and Residual Value Ratios by Vintage Year Index Returns (Rebased to 1 as of Dec-27) 12 1 25% 8 6 4 2 Dec-7 Jun-8 Dec-8 Jun-9 Dec-9 Jun-1 Dec-1 Jun-11 Dec-11 Jun-12 Dec-12 Jun-13 Dec-13 Jun-14 Dec-14 Jun-15 PrEQIn All Real Estate PrEQIn Value Added PrEQIn Opportunistic PrEQIn Real Estate Debt Fig. 4: Three-Year Rolling Horizon IRRs, March 212 - June 215 18% 16% 14% 12% 1% 8% 6% 4% 2% % 2 21 22 23 24 25 26 27 28 29 21 211 Vintage Year Residual Value to Paid-in Capital (%) Distributions to Paid-in Capital (%) Called-up to Committed Capital (%) 212 213 214 215 Fig. 5: Closed-End Private Real Estate: Median Net IRRs and Quartile Boundaries by Vintage Year 35% Three-Year Horizon IRR 2% 15% 1% 5% % 3 Years to Mar-12 3 Years to Jun-12 3 Years to Sep-12 3 Years to Dec-12 3 Years to Mar-13 3 Years to Jun-13 3 Years to Sep-13 3 Years to Dec-13 3 Years to Mar-14 3 Years to Jun-14 3 Years to Sep-14 3 Years to Dec-14 3 Years to Mar-15 3 Years to Jun-15 Real Estate Buyout Venture Capital Mezzanine Net IRR since Inception 3% 25% 2% 15% 1% 5% % -5% -1% 2 21 22 23 24 25 26 27 28 29 Vintage Year 21 211 212 213 Top-Quartile Net IRR Boundary Median Net IRR Bottom-Quartile Net IRR Boundary 1 216 Preqin Ltd. / www.preqin.com
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The 216 Preqin Quarterly Update: Real Estate alternative assets. intelligent data. Preqin Real Estate Online If you want any further information, or would like a demo of our products, please contact us: With global coverage and detailed information on all aspects of the real estate asset class, Preqin s industry-leading Real Estate Online service keeps you up-to-date on all the latest developments in the real estate universe. Source new investors for funds and co-investments Find the most relevant investors, with access to detailed profi les for over 5,1 institutional investors actively investing in real estate, including insurance companies, pension funds, sovereign wealth funds, family offi ces, foundations, wealth managers, endowment plans, banks and more. Identify potential investment opportunities View in-depth profi les for over 5,3 private real estate funds encompassing all strategies, including core, core-plus, value added, opportunistic, debt, distressed and fund of funds. Find active fund managers in real estate Search for fi rms actively targeting real estate investments, with detailed profi les on over 3,2 fund managers from around the world, including background, key contacts and funds raised. Analyze the latest real estate fundraising activity See which fund managers are currently on the road raising private real estate funds and which will be coming to market soon. Analyze fundraising over time by fund strategy, property type and location. Benchmark performance Identify which fund managers have the best track records with performance benchmarks for real estate funds and performance details for over 1,4 individual named funds. Examine fund terms Use our unique Fund Terms Calculator to model fee changes and see: what are the typical terms that a real estate fund charges? What are the implications of making changes to different fees? How do these fees vary between fund type and strategy? Find out how Preqin s range of real estate products and services can help you: www.preqin.com/reo New York: One Grand Central Place 6 E 42nd Street Suite 63, New York NY 1165 Tel: +1 212 35 1 Fax: +1 44 445 9595 London: 3rd Floor Vintners Place 68 Upper Thames Street London EC4V 3BJ Tel: +44 ()2 327 2 Fax: +44 ()87 33 5892 Singapore: One Finlayson Green, #11-2 Singapore 49246 Tel: +65 635 22 Fax: +65 6491 5365 San Francisco: One Embarcadero Center Suite 285 San Francisco CA 94111 Tel: +1 415 316 58 Fax: +1 44 445 9595 Hong Kong: Level 9, Central Building 1-3 Pedder Street Central, Hong Kong Tel: +852 3958 2819 Fax: +852 3975 28 Manila: Pascor Drive Sto. Niño Parañaque City Metro Manila 17 Philippines Email: info@preqin.com Web: www.preqin.com