Attracting Real Estate Capital in North America September 2014

8/10/2019 Attracting Real Estate Capital in North America September 2014

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2014 Preqin Ltd. / www.preqin.com

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The Facts The Challenges of Raising a Real Estate Fund Today

Attracting Institutional Capital The Challenges of Raising a Real EstateFund TodaySeptember 2014

28%

57%

7%0%4%

Significant Increase

Slight Increase

No Change

Slight Decrease

Significant Decrease

Fig. 1: North America-Based Fund Managers Views on HowInstitutional Investor Appetite For Private Real Estate has

Changed in the Last 12 Months

Source: Preqin Fund Manager Interviews, June 2014

The private real estate fundraising market has changedconsiderably in recent years, with the caution displayed by manyinvestors since 2008 being replaced in many cases by renewedappetite for the asset class. Using a sample of contacts from over

2,200 private real estate fund managers pro led on Preqins RealEstate Online , our recently-conducted fund manager surveyreveals that 85% of North America-based fund managers believethat investor appetite for private real estate has signi cantly orslightly increased in the last 12 months, with just 4% stating theyhave seen a decrease in appetite.

In order to discover institutional investors views on the currentfundraising market, Preqin also conducted an investor survey in

August 2014, using a sample of contacts pro led on the Real

Estate Online database, which contains extensive pro les onover 4,500 investors. Detailed pro les include information suchas allocations, strategy and region preferences, investment plansfor the next 12 months, contact information for key decision

makesrs and much more. There is growing investor satisfactionin the asset class; Fig. 2 reveals that 39% of North America-based institutions feel their private real estate investments haveexceeded expectations in the last 12 months, with an additional58% stating that returns have met expectations.

However, despite improving institutional satisfaction in theasset class, many investors still remain wary of making newcommitments to private real estate funds in the year ahead. Fig.3 demonstrates that just 32% of North America-based investors

39%

58%

3%

ExceededExpectations

Met Expectations

Fallen Short ofExpectations

Fig. 2: Proportion of North America-Based Investors thatFeel Their Private Real Estate Investments Have Lived up to

Expectations over the Past 12 Months

Source: Preqin Investor Interviews, August 2014

Source: Preqin

Key Stats:

of fund managers believe that investor appetite forprivate real estate has increased in the last 12 months.

of North America-based fund managers believe thatthere is more competition for core assets.

of North America-based investors plan to invest in theasset class in the next 12 months. 2,200

Detailed private real estate fund manager profiles onReal Estate Online.

of managers have seen a significant or slight increasein competition for capital. 4,500 Institutional investors profiled on Real Estate Online.

85%

32%

74%

76%

O v e r

O v e r
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2 2014 Preqin Ltd. / www.preqin.com


The Facts

plan to invest in the asset class in the next 12 months, with56% unlikely to make new commitments and 12% of institutionsundecided. As a result, with a relatively small pool of investors tosource capital from, fund managers will continue to have to workhard to secure commitments and to get in front of this limited

audience.In terms of their capital outlay, many North America-basedinstitutions are relatively conservative regarding the amount ofcapital they plan to place in private real estate funds in the next 12months, with Fig. 4 showing that just 15% intend to commit morecapital to the asset class than they did over the previous year. Anadditional 15% plan to commit the same amount of capital as theydid in the last 12 months and 26% intend to place less capital inthe asset class. The largest proportion, 44%, did not commit inthe previous year and do not plan to commit in the next year. Asa result, it is possible to see that there are considerable variationsbetween investors, with only a small proportion intending to makenew commitments and commit more capital in the next year.

Consequently, many managers have reported an increasein competition for capital over the last year. Fig. 5 reveals that74% of managers have seen a signi cant or slight increase incompetition for capital, with just 9% stating that there has beena decrease in competition. Managers will therefore continue to

nd it challenging to attract institutional capital in the year ahead,with the crowded fundraising market meaning that competition isgreater than ever.

The improving fundraising market in recent years has led to anincrease in available uncalled capital (dry powder), which standsat $112bn for North America-focused private real estate funds asof August 2014. As a result, managers have signi cant capitalreserves to call on to invest in suitable assets, and are lookingto deploy this capital in the year ahead. Many North America-based managers are bullish concerning the amount of capitalthey plan to deploy in the next 12 months, with 63% planning toinvest more capital than they did over the previous year (Fig. 6).Just 9% of fund managers plan to invest slightly less capital, with

none planning to invest signi cantly less.

46%

28%

17%

9% 0%

SignificantIncrease

Slight Increase

No Change

Slight Decrease

SignificantDecrease

Fig. 5: North America-Based Private Real Estate FundManagers Views on Whether There is More Competition forInvestor Capital than 12 Months Ago


37%

26%

28%

9% 0%

Significantly MoreCapital than in thePast 12 Months

Slightly More Capitalthan in the Past 12Months

The Same Amount ofCapital as in the Past12 Months

Slightly Less Capitalthan in the Past 12Months

Significantly LessCapital than in thePast 12 Months

Fig. 6: Amount of Capital North America-Based FundManagers Plan to Deploy in Real Estate Assets in the Next 12Months Compared with the Past 12 Months


The Challenges of Raising a Real Estate Fund Today

32%

56%

12%

Likely to Make NewCommitments

Unlikely to Make NewCommitments

Undecided

Fig. 3: North America-Based Investors Intentions for PrivateReal Estate Investments in the Following 12 Months


15%

15%

26%

44%

More Capital in Next12 Months than inLast 12 Months

Same Amount ofCapital in Next 12Months

Less Capital in Next12 Months than inLast 12 Months

Did Not Commit inLast 12 Months andNot Committing inNext 12 Months

Fig. 4: North America-Based Investors Expected CapitalCommitment to Private Real Estate Funds in the Next 12Months Compared to the Last 12 Months



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How can Preqinsreal estate data help you?

Preqins Real Estate Online is the leading source of intelligence on

the real estate industry, and is constantly updated by Preqinsdedicated team of multi-lingual analysts.


Source new investors by lteringcomprehensive pro les of over 4,500institutions actively investing in real estate.

Be the rst to know about investors seekingnew real estate funds or co-investments now.

Search for rms actively targeting real estateinvestments and how much dry powder theyhave available to put to work, with detailedpro les on over 2,300 fund managers fromaround the world.

View pro les for over 4,800 real estate funds,and individual performance for over 1,200vehicles.

Conduct competitor and market analysis.

Preqins Real Estate Online is a vital tool for all professionals active

in the real estate industry. For more information, or to arrange ademonstration, please visit:

www.preqin.com/reo
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The Facts

With a large proportion of managers looking to invest in realestate assets in the next 12 months, competition for the mostdesirable assets is increasing. Fig. 8 reveals that 76% and 78%of North America-based fund managers believe that there is morecompetition for core assets and value added/opportunistic assets

respectively, with none believing there is less competition. This isfurther revealed in Fig. 8, which shows that North America-basedinvestor appetite for core and value added assets has increasedover the last 12 months, with appetite for opportunistic assetsshowing a decline.

While many investors are satis ed with the returns achieved inthe last 12 months, there is a relatively small pool of investorsplanning to make new commitments in the year ahead, andmanagers seeking to attract investor capital will continue to ndfundraising challenging.

Fund managers will need to cast the net wide when looking toaise capital, to ensure they get in front of the right investors.The range of services available on Preqins Real Estate Online provide signi cant assistance to fund managers in sourcingactive investors, helping to connect fundraisers with institutions

seeking new investments. With over 4,500 investors pro

led onthis service and detailed investment plans for 278 institutionsseeking new commitments in the next 12 months, Real Estate Online is an indispensable tool for fund managers.

Fig. 9: Sample of North America-Based Investors Seeking New Private Real Estate Commitments in the Next 12 Months

Investor Type Investment Plans for the Next 12 Months

InvestorsDiversiedRealty

Real EstateFund of Funds

Manager

Investors Diversi ed Realty will commit to six to 10 underlying funds in the next 12 months. It will deployapproximately $50-75mn across core, value added and opportunistic vehicles targeting diverse regions across theUS. Investors Diversi ed Realty will consider both new and existing managers when searching for investments.

CentralPension Fund

Private SectorPension Fund

Central Pension Fund will make new commitments to private real estate funds in the next 12 months, with the rstof these commitments planned for Q1 2015. The private sector pension fund will commit to four private real estatefunds, with a mix of existing fund managers in its portfolio, as well as through forming new relationships.

OberlinCollegeEndowment

EndowmentPlan

Oberlin College Endowment is likely to invest $5-14mn in one to two real estate private equity vehicles in the next12 months. The endowment plan will consider value added and opportunistic funds.

Source: Preqin Real Estate Online

The Challenges of Raising a Real Estate Fund Today

76% 78%

24% 22%

0%

10%20%

30%

40%

50%

60%

70%

80%

90%

100%

Core Assets Value Added/Opportunistic Assets

Less Competitionthan 12 Months Ago

The Same Level ofCompetition as 12Months Ago

More Competitionthan 12 Months Ago

Fig. 7: North America-Based Fund Managers Views on the

Level of Competition for Assets: Core vs. Value Added/Opportunistic

P r o p o r t i o n o f R e s p o n d e n t s


24%

52%

73%

40%

80%

56%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

Core Value Added Opportunistic

Aug-13

Aug-14

Fig. 8: North America-Based Investors Appetite for Core, Value

Added and Opportunistic Private Real Estate Funds in theFollowing 12 Months, August 2013 - August 2014

P r o p o r t i o n o f R e s p o n d e n t s

Source: Preqin Real Estate Online

Looking for more information on investors in private real estate funds?

Preqins Real Estate Online contains details of over 4,500 institutions investing in the asset class, with information on 277 investors activelyseeking new commitments in the next 12 months. Detailed pro les include current and target allocations to real estate, strategy andgeographic preferences, future investment plans, direct contact information for key decision makers and much more.

For more information please visit: www.preqin.com/reo
http://www.preqin.com/reohttp://www.preqin.com/reohttp://www.preqin.com/reohttp://www.preqin.com/reohttp://www.preqin.com/reohttp://www.preqin.com/reohttp://www.preqin.com/reohttp://www.preqin.com/reohttp://www.preqin.com/reohttp://www.preqin.com/reohttp://www.preqin.com/reohttp://www.preqin.com/reohttp://www.preqin.com/reohttp://www.preqin.com/reohttp://www.preqin.com/reo

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Attracting Real Estate Capital in North America September 2014