According to data compiled by Private Equity Real Estate, the leading magazine covering the global real estate investment industry, private equity real estate funds have raised a total of $59.5 billion (€45.4 billion) in 2006, far surpassing the $37 billion raised in 2005.
“Given the amount of leverage typically employed by private equity real estate firms, the funds raised in 2006 have buying power of approximately $180 billion,” said Paul Fruchbom, editor of Private Equity Real Estate (PERE). “A significant amount of this money will be spent in international markets as firms spend more and more resources building up their capabilities in the emerging markets of Eastern Europe and Asia.”
The growing influence of private equity real estate firms is being felt around the world. Funds with a global mandate accounted for approximately 45 percent of the capital raised in 2006. Private equity real estate funds targeting Europe and Asia also accounted for a substantial amount of equity, raising approximately $6 billion and $4 billion, respectively.
Funds currently in the market or coming to market within the next 12 months are targeting approximately $80 billion in capital, according to Private Equity Real Estate, suggesting that 2007 could rival 2006 in terms of fundraising and deal activity.
“Blackstone is raising a $10 billion fund,” said Fruchbom. “Morgan Stanley is raising an $8 billion vehicle. And Lone Star is rumored to be raising $6 billion. Each of these funds on its own would surpass the largest private equity real estate fund ever raised. Together, they demonstrate that the private equity real estate industry is mirroring the growth in the broader private equity asset class.”