Private Equity Firms Seek Billions For Real Estate Funds

Aug 18 2011 | 12:07pm ET

Several prominent private equity funds are among the more than 400 raising real-estate funds this year, as the appetite for the asset class returns four years after the onset of the subprime mortgage crisis.

The Carlyle Group, Cerberus Capital Management, Colony Capital, Fortress Investment Group and Starwood Capital Group are all actively fundraising. All told, 441 p.e. firms are raising money, according to Prequin, twice as many as two years ago. And they’re seeking some three times as much—$150 million—as they did either last year or in 2009, and more than in 2007 and 2008.

Colony has raised about half of the $1 billion it seeks. Northwood Investors, Rockpoint Group and Starwood are even more ambitious: They plan to raise at least $2 billion each. And Brookfield Asset Management wants $4 billion, Bloomberg News reports.

All of them, however, pale in comparison to the Blackstone Group’s seventh real-estate fund, which has already raised $4 billion over four months with a $10 billion target.

With so many firms seeking so much money, many are offering lower fees or committing more proprietary capital. The biggest funds raised this year—those garnering $1 billion or more—have seen their average management fee drop to 1.33 from 1.5% three years ago.


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