Real Estate Investment Funds Favor North America
WEDNESDAY, 08 JUNE 2011
Commercial Real Estate Direct Staff Report
Real estate investment funds with acquisition strategies focused on North America account for 248 of the 439 funds that are in the market raising equity, and are out to raise $88.9 billion.
The amount those funds are raising equals 57 percent of the total equity commitments being sought by real estate funds worldwide, according to Preqin, a British research firm.
Investors' interest in North American markets has increased somewhat since last summer when 52 percent of the equity being sought by funds was targeted for investment in the United States and Canada.
Interest over the same span has waned for commercial properties in Europe due to mounting economic problems that have countries like Portugal, Ireland, Greece, Spain and Italy at risk of going bankrupt.
"Europe is a basket case, so there is relative perceived safety in the United States," said Sonny Kalsi, founder and managing director of Green Oak Real Estate Advisors, an investment manager with offices in New York, London, Germany and Tokyo.
"The U.S. is the perceived best real estate market and a lot of institutional investors here are invested at levels below their allocations to real estate and a lot of Europeans are below their U.S. allocations," Kalsi added, during a panel discussion last week at the U.S. Opportunity & Private Fund Investing forum in Manhattan.
Joseph Nahas, vice president of institutional marketing for BPG Properties Ltd., a Philadelphia investment manager, said that turmoil in markets overseas means that foreign investors are more willing to invest at lower capitalization rates in the U.S. than in their home countries.
"They are most interested in core equity investments and debt funds...not so much in value-add or opportunistic investing here," said Nahas. His firm is in the market to raise up to $250 million for a fund that will invest exclusively in the U.S.
"The U.S. will always be the biggest market" for real estate investing, added Tim Friedman, publications and communications director at Preqin's London office. "It's largely due to where the most active real estate markets are and to where the institutional investors are."
North America, primarily the U.S., is the home for managers of 267 of the 439 real estate funds that are in the market raising equity.
The largest North America-focused fund is Blackstone Group's Blackstone Real Estate Partners VII, an opportunistic vehicle that's seeking $10 billion and is a follow up to Fund VI, which raised $10.9 billion in 2008.
Other large fund managers include Carlyle Group, which is in the market to raise $3 billion for an opportunistic vehicle that will buy equity stakes and debt, and Rockpoint Group, which is seeking $2.5 billion for Rockpoint Real Estate Fund IV.
Rounding out the five largest North American funds are Lone Star Funds' Fund VII, which has been in the market since late 2009, and Brookfield Asset Management, which is marketing Brookfield Property Investors.
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