Fundraising volume in 2022 has been relatively mediocre through the first nine months of the year, but that could change if the fourth quarter delivers some potential blockbuster closings.
During third quarter 2022, 28 private equity real estate funds announced final closings, raising an aggregate of $21.2 billion, according to Institutional Real Estate, Inc.’s IREI.Q database. The quarterly volume pushes the year-to-date fundraising total to $76.9 billion, which is 17.8 percent less than the comparative 2021 and 2020 totals, both of which registered $93.5 billion. The 2022 total is the lowest nine-month dollar volume since 2017’s $18.2 billion figure. In addition, only 106 funds have closed this year, which pales in comparison with the 2021 total of 167. The average fund size year-to-date in 2022 is $725 million, down significantly from the previous year’s average size of $961 million.
However, the tepid year-to-date fundraising volume could soon be forgotten. A strong fourth-quarter push could significantly elevate the year’s final numbers. TPG Real Estate already has announced the closing of its TPG Real Estate Partners IV with $6.8 billion of total commitments. In November, Brookfield Asset Management announced the final closing of Brookfield Strategic Real Estate Partners IV after raising $17 billion of equity. In addition, it’s possible Blackstone Real Estate Partners X, which is reportedly eyeing a final close of approximately $30 billion (in July, it was reported the firm had raised more than $24 billion for the fund), could wrap up fundraising by year end. If the Blackstone fund does close during the fourth quarter, it would put an entirely different spin on the fundraising story for 2022 and likely push the annual fundraising total to a record of more than $170 billion, topping the 2021 total of $160.5 billion.
During the third quarter, six megafunds closed, raising a total of $12.4 billion, which represents 58 percent of the total fundraising volume. The largest funds to close during the quarter were Aermont Capital’s Aermont Capital Real Estate Fund V ($3.8 billion) and LaSalle Investment Management’s LaSalle Asia Opportunity Fund VI ($2.2 billion).
The majority of funds closed during the third quarter have a U.S.-property focus; 21 such funds raised $11.0 billion. Only four funds closed that have a Europe-focused investment mandate, but those four funds raised a tidy sum of $7.8 billion. Two funds focused on Asian markets closed during the quarter, raising $2.3 billion. In addition, there was one fund focused on the Canadian multifamily sector that raised $125 million.
The perception is that perhaps fundraising activity has slowed this year due to investors tightening their purse strings amid the current uncertainty and volatility of today’s financial markets. In addition, some institutional investors could be holding back on new commitments due to the tens of billions of dollars of dry powder still seeking investments and/or the shifting of portfolio allocations due to the denominator effect created by falling stock markets. But, as evidenced by the massive Blackstone and Brookfield fundraises, it is also evident that many investors are betting on a potentially very attractive buying opportunity and don’t want to miss out.
Larry Gray is the editorial director at Institutional Real Estate, Inc.