Fund attorney: Firms hold $300bn in dry powder

Hundreds of billions of dollars are set to invest in distressed debt and real estate, according to funds lawyer Sandy Presant - but few investors will ‘jump’ now when opportunities could be better in six to 12 months.

More than $300 billion is sitting on the sidelines for investments in distressed private equity, real estate and corporate debt situations, according to Sandy Presant, chair of GreenbergTraurig’s real estate fund services.

Speaking at the annual US-Israel Business Summit in New York today, Presant said the real estate and private equity industries were sitting on a large volume of uninvested commitments waiting for bid-ask spreads to narrow.

He estimated the dry powder waiting to be deployed was at least $300 billion – but could be as high as $500 billion.

AREA Property Partners chief financial officer Stuart Koenig told delegates at the forum the figure for opportunistic real estate funds could be much lower – closer to $50 billion – but that most investors were waiting for “seller expectations” to further align with what buyers were willing to pay.

“There’s a sense of ‘why jump in now when the opportunities could be better in December or January next year’. There is  a lot of that phenomenon taking place right now.”

Few deals are taking place amid the global market dislocation with worldwide property transactions down 67 percent over the past 12 months, with second quarter volume just $48.6 billion – a 5 percent fall from trading in the first three months of the year, according to data provider Real Capital Analytics.

The Blackstone Group has about $13 billion in dry powder for private equity investing while Kohlberg Kravis Roberts has about $15 billion split among US, Asia and European funds. Turnaround specialist Sun Capital has more than $4 billion uninvested and Trilantic Capital, which spun out of Lehman Brothers this year, has about $1.7 billion of dry powder.

Christopher Witkowsky contributed to this article.