Carlyle May Raise $2.8B For European Real Estate

Buyout shop Carlyle Group may raise between 1.5 billion and 2 billion euro ($2.1 billion to $2.8 billion) for a fourth European real estate fund, Reuters reported. The firm still has about 600 million euros remaining in the Carlyle Europe Real Estate Partners III fund, Reuters said, adding that it was expected to be fully invested this year.

(Reuters) – Private equity giant Carlyle [CYL.UL] may raise 1.5-2 billion euros ($2.1-$2.8 billion) for a fourth European real estate fund next year and expects banks in the region to increasingly offload property assets.

“We see that there is now a greater willingness by the banks to find agreement,” Eric Sasson, a managing director and head of Carlyle’s European real estate operations, told Reuters on the sidelines of the MIPIM property trade fair.

In the past two years, European banks have been largely able to hold off on the need to unload their souring property loans, thanks to state aid, against the hopes of opportunistic funds were seeking cut-price assets.

“Judging by the amount of discussions we had with banks, we now have ten times more discussions with banks asking if we’re interested to buy their assets, compared with a year ago — so it’s moving in the right direction,” Paris-based Sasson said.

He said a sticking point for doing deals with the banks had been reaching agreement on the value of the assets being sold, but he believes an agreement on pricing is getting closer.

“There is an element of fatigue — at some point they will have enough of carrying something on their balance sheet. You extend as long as you can but at some point you will say ‘enough is enough’,” Sasson said.

“Times are also starting to get better (for the banks) and it will become easier for them to sell something that generates a loss,” he said, adding the gradual depreciation of those assets also put further pressure for banks to sell. Carlyle has $150 billion OF ASSETS under management globally. It still has about 600 million euros of equity remaining in the Carlyle Europe Real Estate Partners III fund, which Sasson expected to be fully invested this year.

The fund had, in the past year, invested in a portfolio of six London offices linked to the failed White Tower CMBS for 671 million pounds, and formed a joint venture to develop four London projects in the fast-growing student housing sector.

In particular, Sasson said he remains keen on the UK and the London office market, although he acknowledged deals meeting the fund’s criteria for a minimum of about 15 percent return were getting much harder to find.

He is also looking to other European markets, such as France and Spain, the latter country already attracting interest from a slew of investors seeking double-digit returns from cut-price prime retail assets.

“France is picking up in terms of pricing and transactions. There won’t be real distressed situations like the UK or Spain — but there will be new opportunities, be it state disposals or corporate disposals,” he said.

(Reporting by Daryl Loo; Editing by Andrew Macdonald)