Preqin: Real Estate PE Fundraising Plummets

NEW YORK (Reuters) – Fundraising by real estate private equity firms reached a five-year low in the second quarter as investors remained worried about falling values, according to an alternative asset research firm.

Sixteen funds dedicated to real estate investment raised a total of $8.9 billion, the lowest quarterly total since the third quarter 2004, when 22 private equity real estate funds raised $8 billion, according to a report released on Tuesday by Britain-based Preqin.

“With many investors still unable to commit new capital, and with other investors more cautious towards the market following significant write-downs in value for existing investments, fundraising will remain an extremely challenging task in 2009,” the report said.

Fundraisers have also lowered their targets by $28 billion over the past three months, and in some cases have shelved or abandoned their funds altogether.

So far this year, 36 real estate funds have been abandoned or put on hold, compared with 25 funds in all of 2008, the report said.

Funds focused on Europe represented the biggest group in terms of value raised, with five funds raising a total of $5.3 billion.

About 3.1 billion euros ($4.32 billion) of that was attributed to the Blackstone Real Estate Partners Europe III, the largest fund to close so far this year, Preqin said.

Nine funds focused on the United States raised $3.2 billion, and two funds focused on the Asia and the rest of the world region raised $0.4 billion, Preqin said.

Since the start of 2008 private equity real estate returns have taken a big hit, with one-year horizon internal rate of returns down 39.9 percent, the worst performance in the private equity industry. (1 euro = $1.395)

(Reporting by Ilaina Jonas, editing by Matt Daily)