Real estate private equity funds have a big issue: They need more capital, and it’s not that easy to get, at least not anymore. A mere three years ago, capital was abundant. Between 1999 and 2008, investors filled real estate funds’ coffers with equity capital totaling some $420 billion, nearly 80 percent of which was raised in the relatively short period between 2005 and 2008. During the same period, debt became overly abundant and very inexpensive, and underwriting standards became very loose. Nearly half of the approximately $1 trillion in commercial mortgage debt that has been originated since 2002 was issued in the two-and-a-half-year period between 2005 and 2007, right at the peak of the market.

So, until recently, obtaining equity or debt capital was relatively easy for funds, but now it is scarce, and scarce at a time when funds need capital the most. In this post–credit crisis environment, it is generally understood why fresh capital is so scarce, but why are r