Oct 06, 2011
Real Estate Spotlight is the monthly newsletter published by Preqin packed full of vital information and data, all based on our latest research into the private equity real estate industry. Real Estate Spotlight combines information from our online products Real Estate Online and Real Estate Capital Sources.
Real Estate Spotlight
October 2011
The Changing Private Real Estate Investor Universe
As the asset class continues to struggle in the aftermath of the downturn we take a look at the impact the crisis has had on investor attitudes to private real estate. How have their preferences and changed and how is the industry evolving? Find out more in this month's feature article. Page 2
October 2011 Volume 5 - Issue 10
Nordic-Based Fund Managers
An in-depth look at real estate fund managers investing in in the Nordic region, considering their strategic and property preferences and fundraising in the region over the past few years. Page 5
FEATURED PUBLICATION: The 2011 Preqin Private Equity Real Estate Investor Review
Real Estate Investor Focus
An analysis of the insurance companies that invest in the asset class, taking a look at their strategic and geographic preferences. Page 6
Fundraising
How many funds are on the road, and how much is being sought by managers in the various global regions? All the data can be found in Fundraising Spotlight. Page 7 More information available at: www.preqin.com/reir
Secondary Market
A look at the secondary market for real estate funds and the investors that are looking to buy and sell on the secondaries market. Page 8
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Industry News
Each month Preqin's analysts speak to hundreds of investors and fund managers from around the world, uncovering exclusive intelligence on real estate investment plans. University of Rochester Endowment, LACERS and Allianz Real Estate are amongst those featured this month. Page 9
Conferences Spotlight
A round up of forthcoming industry conferences from around the world. Page 10
You can download all the data in this month's Spotlight in Excel. Wherever you see this symbol, the data is available for free download on Excel. Just click on the symbol and your download will begin automatically. You are welcome to use the data in any presentations you are preparing, please cite Preqin as the source.
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Feature
The Investor Universe
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The Changing Private Real Estate Investor Universe
Recent years have seen huge changes in the private real estate fund market, and institutional investor attitudes to the asset class are constantly evolving. Forena Akthar reveals how investor attitudes, preferences and allocations are changing and what this means for the fundraising market.
Fig. 1: Quarterly Private Equity Real Estate Fundraising, Q1 2009 - Q2 2011
70 60 50 40 30 20 10 0 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 15.3 14.2 9.3 12.6 36 37 33 25 15.7 9.4 12.3 7.3 30 37 39 32 22 9.1 12.6 58
Fig. 2: Average Time Taken for Funds to Achieve a Final Close
Average Time Spent in Market (Months)
8 6 4 2 0 8 6 4 2 0 2007 2008 2009 2010 Jan-Sep 2011 8.8 11.8 16.7 16.9 16.1
No. Funds Raised
Aggregate Commitments ($bn)
Source: Preqin
Source: Preqin
Year of Final Close
The last three years have been particularly difficult for investors and fund managers in the private real estate fund market, and organizations across the industry are still feeling the longlasting effects of the financial crisis. In response to uncertain market conditions, a significant number of investors have halted their indirect real estate activity, and those that are making fund investments are doing so on a much smaller scale. There are some recent signs of improvement, but as the fundraising market remains extremely competitive, fund managers will need to work hard to stand out from the crowd. In the course of researching the newly released 2011 Preqin Private Real Estate Investor Review, the most comprehensive publication ever produced on the private real estate investor universe, Preqin has spoken to over 1,500 investors, providing a unique insight into the evolving attitudes of these institutions.
needed an average of 16.1 months in market before reaching a final close. Although there has been a slight improvement in 2011, it is clear from these figures just how difficult it has been for fund managers to identify investors that are willing to invest, as well as how competitive the market is.
Investor Appetite
Despite slow fundraising, there are signs that the market may be improving, with recent research conducted by Preqin suggesting that an increasing number of the larger investors in the asset class are returning to market. A series of extensive interviews with 400 private real estate fund investors of varying size, location, and type, revealed that 35% of respondents expect to make fund commitments in the next 12 months, 49% of respondents are unlikely to invest, and a further 16% have yet to decide whether they will be active in the coming year. Fig. 3 shows that the likelihood of committing to funds in the next 12 months increases parallel to respondents' total assets, and 43% of institutions with more than $10bn in assets under management are looking to invest in private real estate funds in the next 12 months. The 2011 Preqin Private Real Estate Investor Review includes profiles for over 1,500 investors that have an interest in private real estate funds, including a selection of 20 key institutions to watch which are likely to be particularly active in the next 12 months. Another encouraging sign for fund managers is that the majority of investors are seeking to maintain their target allocations to real estate. As outlined in more detail in the body of The 2011 Preqin Private Real Estate Investor Review, 69% of all investors in private real estate funds are currently below their overall target allocations © 2011 Preqin Ltd. www.preqin.com
The Fundraising Market
Real estate fundraising has been slow since 2009, with quarterly totals ranging from $15.7bn in Q1 2010 to as little as $7.3bn in Q4 2010 (see Fig. 1). At the end of June 2011, only 54 funds had reached a final close in the year so far, raising an aggregate $21.7bn in investor equity. 2011 fundraising may therefore fall short of 2010 figures, when 131 funds raised a total of $44.7bn. It is also taking firms significantly longer to hold final closes for their funds, with vehicles that closed in 2010 spending an average of 16.9 months in market, almost double the time funds that closed in 2007 spent in market before reaching a final close (see Fig. 1.2). Funds that held final closes between January and September 2011
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Feature
The Investor Universe
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Fig. 3: Investors' Intentions for Private Real Estate Funds in Next 12 Months by Investor Assets under Management
100%
Fig. 4: Unlisted Fund Strategy Preferences of Investors in Private Real Estate Funds
100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0%
Proportion of Investors
90%
86% 82% 66% 65% 58% 54%
Proportion of Investors
26%
Sep-10
Sep-11
80% 70% 60% 50% 40% 30% 20% 10% 0% Less than $1bn 19% 55%
32% 43% Likely to Commit
51% 42%
Unlikely to Commit
32% 29% 32% 25% 28% 23%
18% 16%
Undecided 17% $1-9.9bn 15% $10bn +
Source: Preqin
Investor Assets under Management
Fund Strategy Source: Preqin
to real estate, 20% are at their targets and 11% are above their target allocations. This means that fundraising should pick up in the next few years as property markets stabilize, valuations improve, and investors seek to meet their targeted level of exposure to the asset class.
Changes in the Market
Market conditions have caused a shift in the strategic preferences of institutional investors. Higher-risk strategies are viewed less positively and there has been an increase in appetite for lower risk core funds. As can be seen in Fig. 1.4, appetite for value added and opportunistic funds has decreased in the last 12 months, and although there has also been a small decline in appetite for core funds in 2011, these vehicles are still the most favoured strategy for investors in private property funds. Increasing investor caution has led to a decline in the number of investors willing to invest with new managers in recent years. Overall, 26% of investors will definitely invest in first-time funds, with an additional 15% willing to consider first-time vehicles; the corresponding figures in 2010 were 34% and 16% respectively. 11% will only commit to first-time funds if they are operated by spinoff firms (16% in 2010) and the proportion of investors not willing to invest with first-time managers has increased from 34% in 2010 to 48%. Investors are scrutinizing potential investments more closely than ever, and while the largest, brand-name firms will still be able to raise large funds, many institutions are looking for firms which can prove they are specialists in their particular market. A number of firms that have successfully raised capital in 2011 are managing funds which are focused on particular sectors and/or locations and where the team has a proven track record in these markets.
Fund managers that can demonstrate that they will be able to navigate a difficult market, achieve successful returns for their investors, and are managing funds that are consistent with the revised aims of the institutional investor universe are likely to see some improvement in fundraising conditions in the coming months. However, as many institutions have either placed their private real estate investments on hold, or have reduced their usual capital outlay to the industry, competition for investor capital will remain intense in the next 12 months and identifying investors that are willing to make commitments will be critical.
Data Source:
The 2011 Preqin Private Real Estate Investor Review Featuring profiles for over 1,500 of the most important investors in private real estate funds worldwide, plus over 60 pages of analysis and league tables, the 2011 Preqin Private Real Estate Investor Review is the most comprehensive printed guide to institutional investors in private equity real estate ever produced.
Competition in the Market
In September 2011, there were 442 private equity real estate funds on the road targeting an aggregate $151.5bn in investor commitments, more than the 400 funds that were in market in September 2010, targeting a total of $129bn.
www.preqin.com/rer
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Funds of Funds
Opportunistic
Core-Plus
Debt
Value Added
Distressed
Core
2011 Preqin Private Real Estate Investor Review
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Featuring profiles for over 1,500 of the most important investors in private equity real estate funds worldwide, plus over 60 pages of analysis and league tables, the 2011 Preqin Private Real Estate Investor Review is the most comprehensive printed guide to institutional investors in private equity real estate ever produced. The 2011 review represents a vital resource for all those involved in the marketing of private equity real estate funds, investor relations, investment advisors, and those considering launching a new vehicle in 2011/12.
LP Profiles include the following key information: · Direct contact information for key personnel · Key financial information · Sample investments · Fund preferences by type, geography and experience · Plans for investments in 2011/12 Over 60 pages of vital analysis are also provided, including: · A detailed look at the investor universe including changing allocations, preferences and plans for the next 12 months · Key investors to watch in 2011/12 · Individual analysis sections for investors in all major countries and regions worldwide · Analysis of the current fundraising environment · Full listings for every private equity real estate fund currently in market
The 2011
Preqin Private Real Estate Investor Review
www.preqin.com/reir
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Fund Managers
Nordic-Focused Fund Managers
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Nordic-Focused Fund Managers
Sarah Unsworth takes a look at private real estate fund managers investing in the Nordic region Fig. 1: Annual Nordic-Focused Fundraising, 2006 - September 2011
12 10 8 6 4 2.1 2 0.6 0 2006 2007 No. Funds Raised 2008 2009 2010 2011 Aggregate Commitments (mn) 1.5 0.8 0.3 8 6 4 10 9
Fig. 2: Nordic-Focused Funds on the Road
8 7 6 5 4 3 2.1 7
1 0.1
2 1 0 No. Funds Raising Aggregate Target (bn)
Source: Preqin
Source: Preqin
Fig. 3: Nordic-Focused Fund Managers by Firm Headquarters
9 8 7 6 8 7
Data Source:
Real Estate Online There are currently profiles for 74 Nordic-focused fund managers on Preqin Real Estate Online.
3 2 2
Number of Firms
5 4 3 2 1 0 Sweden Finland UK Denmark US Norway 4
For more information please visit: www.preqin.com/reo
Location of Firm Headquarters Source: Preqin
Fig. 4: Breakdown of Aggregate Nordic-Focused Capital Raised by Strategy, 2008 - September 2011
Fig. 5: Property Preferences of Nordic-Focused Real Estate Fund Managers
70% 60% 65% 65%
Proportion of Firms
50% 40% 30% 20% 10%
50% 42% 38%
35% 27%
Residential
0%
Office Retail Logistics
Commercial
Warehouse / Distribution
Source: Preqin
Source: Preqin
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Hotel
Investors
Insurance Companies
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Insurance Companies
Farhaz Miah takes a look at the insurance companies that invest in private real estate Fig. 1: Key Facts
Average Allocation to Real Estate Average Target Allocation to Real Estate 6.8% 10.4%
Source: Preqin
Fig. 2: Breakdown of Insurance Companies by Assets under Management
Source: Preqin
Fig. 3: Breakdown of Insurance Companies by Overall Real Estate Allocation
Fig. 4: Fund Strategy Preferences of Insurance Companies
70%
Proportion of Investors
60% 50% 40% 30% 20% 10% 0%
58% 52% 50% 39% 22% 17% 15% 6%
Value Added Opportunistic Secondaries Core-Plus Core Debt Distressed Fund of Funds
Source: Preqin
Source: Preqin
Fig. 5: Unlisted Fund Location Preferences of Insurance Companies by Investor Location
100%
Proportion of Investors
90% 80% 70% 60% 50% 40% 30% 20% 10% 0% North America Europe Asia and Rest of World
North AmericaFocused Funds
Data Source:
Real Estate Online
EuropeFocused Funds
There are currently profiles for 215 insurance companies actively investing in real estate on Preqin Real Estate Online. For more information please visit: www.preqin.com/reo
Asia and Rest of WorldFocused Funds
Source: Preqin
Investor Location
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Fundraising
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The Fundraising Lowdown
Jonathan Ma gives a round-up of the latest real estate fundraising statistics Fig. 1: Real Estate Funds in Market
North America
No. of Funds Aggregate Target Size ($bn) Average Target Size ($mn) 257 88.2 356
Fig. 2: Funds in Market by Target Size
Asia &RoW
85 27.4 357
400 350 300 250 200 No. Funds Raising
Europe
100 36.0 387
Overall 442 151.5 363
Source: Preqin
150 100 50 0 Less than $500mn $500-999mn $1bn+
Data Source:
Real Estate Online For the latest and historical fundraising stats visit: www.preqin.com/reo
Aggregate Target ($bn)
Source: Preqin
Target Size
Fig. 3: Notable Europe-Focused Funds on the Road
Fund European Diversified Fund UBS (D) European Mega Core Property Fund UK Property Income Fund ING REIM European Shopping Centre Fund AXA Development Venture III Niam Nordic V CRE Senior 1 Curzon Capital Partners III Pradera Turkish Retail Fund The Avingstone Fund Manager AXA Real Estate UBS Global Real Estate Legal & General Property ING Real Estate Investment Management AXA Real Estate Niam AXA Real Estate Tristan Capital Partners Pradera Avingstone Target Size (mn) 1,500 EUR 1,000 EUR 700 GBP 750 EUR 600 EUR 600 EUR 500 EUR 500 EUR 500 EUR 500 EUR Strategy Core and Core-Plus Core Core and Core-Plus Core-Plus Opportunistic Opportunistic Debt Core-Plus and Value Added Value Added Distressed Property Focus Industrial, Logistics, Office, Retail Office, Retail Industrial, Office, Retail Shopping Centre Hotels, Logistics, Mixed Use, Office, Retail Any Hotels, Industrial, Logistics, Office, Residential, Retail Logistics, Office, Residential, Retail Retail, Shopping Centre Hotels
Recently Closed Funds
Fund: Manager: Strategy: Property Focus: Geographic Focus: Final Close: Sample Investors: Green Courte Real Estate Partners III
Green Courte Partners Value Added Mixed Use, Residential, Retail US 407 USD (Sep 2011) University of Michigan Endowment
Fund: Manager: Strategy: Target Net IRR: Property Focus: Geographic Focus: Final Close:
Activum Fund II
Activum SG Capital Management Opportunistic, Distressed 20% Office, Retail Germany 238 EUR (Sep 2011)
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Secondaries
Secondary Market Investor Preferences
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The Secondary Market
Antonia Lee takes a look at the preferences of investors looking to purchase fund stakes on the secondary market
Interest in real estate secondaries has increased over the past few years as the market has evolved. Of the institutional investors Preqin has spoken to with an interest in purchasing private real estate fund stakes on the secondary market, 22% are highly likely to do so, 59% would possibly do so, and a further 19% said they would do so on an opportunistic basis in the next 24 months. As illustrated in Fig. 2, a wide range of institutional investor types are interested in buying secondary fund stakes. Public pension funds make up the largest proportion (22%) of investors looking to purchase real estate fund interests on the secondary market within the next 24 months. Of the public pension funds that are actively seeking secondary market opportunities, 74% expect to make a secondary market purchase within the next 12 months. The secondary market for real estate was previously dominated by primary and secondary real estate fund of funds managers, but institutional investors looking to take part in secondary transactions now make up a significant proportion of secondary market buyers. The proportion of traditional secondary market vs. non-traditional secondary market buyers is illustrated in Fig. 3. While the proportion of non-traditional buyers is higher at 76%, traditional buyers do still dominate the market as they account for the majority of the secondary market deal volume.
Fig. 1: Investors Looking to Buy Real Estate Fund Stakes on the Secondary Market: Likelyhood of Buying in Next 24 Months
Fig. 2: Make-up of Investors Looking to Buy on the Secondary Market in the Next 24 Months by LP Type
Source: Preqin
Fig. 3: Traditional vs. Non-Traditional Buyers
Data Source:
Preqin's Secondary Market Monitor Product contains profiles for 140 buyers of secondary stakes in real estate funds and 53 investors looking to exit real estate funds via the secondary market For more information please visit: www.preqin.com/smm
Source: Preqin
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News
Industry News
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Industry News
The inside scoop from the world of private real estate gathered by Preqin's team of researchers. Investment Plans Los Angeles City Employees' Retirement System has invested USD 25 million in Cornerstone Enhanced Mortgage Fund I.
The fund focuses on mortgages that are unlikely to default. The USD 10.7 billion public pension plan has a 7% target allocation to real estate and the new commitment will form part of its core real estate strategy. Five investors have announced plans to follow in LACERS's footsteps and will make varying commitments to real estate in the course of the coming year. superannuation scheme will also consider co-investing. In addition to unlisted real estate funds, Australian Super is looking at direct investment opportunities. Its current real estate portfolio is 99% allocated to unlisted funds.
Fund Closes Duet European Real Estate Debt Fund has
closed having raised GBP 300 million. The fund invests in real estate assets with strong commercial backing that have either an over-leveraged capital structure or need refinancing.
Shell Asset Management Company is to
invest in six core or value added funds, although it is yet to decide the value of these investments. The EUR 50 billion asset manager, which has a 7.5% target allocation to the asset class, is looking for funds focused on Europe or North America and generally invests through regional or country-specific funds. Although it usually invests with experienced managers, it will consider first-time managers that offer attractive opportunities and a strong strategic plan.
Exeter Industrial Value Fund II held a third close a few weeks ago, and anticipates holding another before closing for good around February next year. To date the fund has raised USD 264 million of its USD 425 million target. It acquires, develops, re-develops, operates, leases and sells industrial properties in major markets throughout the Eastern, Central, and Southern US.
Allianz Real Estate is also looking to invest in
core and value added funds in the next year. The EUR 21.9 billion asset manager will commit between EUR 50 million and EUR 150 million per fund, and will consider joint ventures and co-investment opportunities. Over in the US, the USD 1.7 billion
What's New?
Do you have any news you would like to share with the readers of Spotlight? Perhaps you're about to launch a new fund, have implemented a new investment strategy, or are considering investments beyond your usual geographic focus? Send your updates to cwilson@preqin.com and we will endeavour to publish them in the next issue. All of Preqin's exclusive intelligence is available on Real Estate Online. Subscribers can view more news and information here: www.preqin.com/reo
University of Rochester Endowment is
planning to invest in one or two real estate funds. The endowment plan, which has a target and actual allocation of 9% to the asset class, is looking to invest in attractive value added and opportunistic funds managed by firms with a good track record. It generally invests USD 10 million per fund.
AustralianSuper meanwhile expects to
invest between AUD 400 million and AUD 500 million in real estate over the next 12 months. It focuses largely on the domestic market, although it will invest overseas if an appropriate opportunity materializes, while it has a preference for core vehicles managed by experienced managers. The
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Conferences
Forthcoming Events
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Conferences Spotlight
Conference The Real Estate General Counsel's Forum Expo Real 2011 Distressed Assets 5th Real Estate Private Equity Summit 2011 REISA Annual Conference Plan Sponsor Real Estate Conference Real Estate Investment World Latin America 12th Annual European Real Estate Opportunity & Private Fund Investing Conference ANREV Annual Conference 2011 The Women's Alternative Investment Summit PERE Forum: New York Financing, Investing & Real Estate Dev. for Data Centers NAREIT Annual Convention MIPIM Asia 2011 Real Estate Expo 2011 PERE Forum: Germany Capital Markets in Real Estate IPD/IPF Property Investment Conference 2011 Real Estate Subordinated Debt Origination & Investment Bank & Financial Inst. Conference on Real Estate Workouts New York National Conference Western Non-Traded REIT Industry Symposium Public Fund Boards Forum Forum on Real Estate Opp. & Private Fund Investing MIPIM 2012 Dates 3 - 4 October 2011 4 - 6 October 2011 4 - 5 October 2011 5 October 2011 16 - 18 October 2011 17 - 19 October 2011 18 - 20 October 2011 25 - 26 October 2011 31 October - 1 November 2011 3 - 4 November 2011 9 - 10 November 2011 9 - 10 November 2011 15 - 17 November 2011 15 - 17 November 2011 15 November 2011 17 - 18 November 2011 17 November 2011 24 - 25 November 2011 29 - 30 November 2011 5 - 6 December 2011 5 - 6 December 2011 7 - 8 December 2011 11 - 13 December 2011 18 - 20 January 2011 6 - 9 March 2012 Location New York Munich Texas New York Las Vegas Chicago Miami London Singapore New York New York Los Angeles Dallas Hong Kong New York Frankfurt New York Brighton New York Dallas New York Dana Point, CA New Orleans Laguna Beach Cannes Organizer IMN Messe Munchen ALM iGlobal Forum REISA PREA Terrapinn IMN ANREV Falk Marques Group PEI Media IMN NAREIT Reed MIDEM NYC Network Group PEI Media NYU Schack IPD IMN IMN ICSC IMN IIR IMN Reed Expositions
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