Landmark Partners tallied 100 real estate secondary transactions, representing $5.3 billion of net asset value (NAV) that closed or were placed under contract in 2018. Landmark Partners is a longstanding investor in the real estate secondary market and has tallied NAV traded and other market statistics since 1996. The firm compiles data on closed and under contract transactions from a wide universe of sources, including its own transaction experience and ongoing dialogue with other key market participants.
Aggregate dollar volume of $5.3 billion represents a 12 percent decline from the $6.0 billion transacted in 2017; however, it is a 6 percent increase from the $5.0 billion transacted in 2016. 2018 transaction volume was achieved despite no large-scale transactions ($1.0 billion+) closing during the year. Comparatively, 2017 volume included the sale of a $2 billion portfolio by a university endowment.
Robust activity was driven by fund sponsors with more than $2.1 billion of transaction volume coming from the recapitalization of mature funds and portfolio of assets. Sponsor-driven activity increased from the $1.4 billion achieved in 2017. The increase in fund and portfolio recapitalizations can be attributed to the aging of the cycle of “peak” vintage funds raised from 2006 through 2008. While many of these funds have reached or exceeded their initial legal termination dates, a substantial portion remain unresolved, with assets remaining under management. As demonstrated over the past two years, the real estate secondary market has established itself as an efficient and effective way for fund sponsors to provide limited partners with a liquidity option through the recapitalizations of fund vehicles and portfolios.
The 100 transactions logged last year continues the pacing of an average of 100 transactions logged per year from 2015 to 2017.
Most real estate partnerships traded were U.S.-focused (48 percent) or European-focused partnerships (35 percent), followed by Asian funds (11 percent) and global or other funds (6 percent).
Fund sponsors and other asset managers were the most active sellers throughout 2018 with $2.6 billion of volume (49 percent of total transaction volume), up from $1.3 billion (21 percent) in 2017. The wind down of fund of fund vehicles contributed to 2018 sale activity. Fund of funds sold approximately $525 million of NAV (10 percent), up from $122 million (2 percent) in 2017. Endowments and foundations represented $243 million of volume (5 percent) in 2018. This is a significant decrease from the $2.8 billion (47 percent) of transaction volume witnessed in 2017, when a sale by a university endowment drove a substantial percentage of volume.
Pension funds represented $1.2 billion of volume (23 percent), which is consistent with dollar amount traded in 2017. Banks and insurance companies accounted for $700 million of volume (13 percent) in 2018, up from $480 million (9 percent) in 2017.
Approximately half of the sellers involved in 2018 transaction activity were in the United States (50 percent), followed by Europe (39 percent) and Asia (11 percent).
The Landmark Partners dataset does not include the entire volume of “LP-to-LP” trades and, as a result, could understate the aggregate volume of activity. Such trades are naturally discrete and typically not publicly disseminated.
Transaction volume reflects an estimate of manager Reported Value at the time of sale; excludes trades of less than $10 million in United Kingdom and European unlisted funds.
Past performance is not indicative of future results.
