Read Date: 10/2020
- U.S. private equity real estate (PERE) funds are still holding record levels of dry powder – $147 billion as of December 2019, according to Preqin
- H1 2020 was painfully slow for capital raising for global real estate funds – peak of $83 billion in 2019, and now only $23 billion as of 8/2020
- H2 2020 is looking light also
- Starting around August 2020, there has been a gradual shift of investors from defense to offense (aka restarting investment activity)
- Shifting to offense falls into two different camps: 1. the steady, strategic investors who believe COVID-19 is not going to disappear in the immediate future, but they don’t think a temporary disruption should impact long-term strategic investment plans OR 2. the investors focusing on a “two-minute offense strategy,” meaning they are actively seeking to take advantage of opportunities that have resulted or been accelerated by the downturn
- Even before COVID-19, capital was flowing to the large PERE funds, such as Blackstone, Brookfield Asset Management and Starwood Capital Group – COVID-19 has further magnified that trend
- The current fundraising environment is challenging for some of the smaller fund managers so they might JV with larger managers to help stretch their capital
- M&A activity among fund managers might come back – it was big in 2017 and 2018 and dropped off a bit in 2019