Mid-Year Fundraising Update from Preqin

Preqin recently released their mid-year report on real estate private equity fund raising efforts.  The second quarter of 2009 saw the weakest activity since 2004 with 21 funds closing with a total of $10.3 billion.  This is a massive drop from the levels seen in the second quarter of 2008, when private equity real estate funds raised $37 billion.  So far in 2009, funds have raised $26.3 billion, down from $69 billion in the first half of 2008 and $57 billion in the first half of 2007.

To compensate for the lower fundraising activity in the market, fund managers have begun to adapt by implementing interim closes to lock in investors yet keep options open for future capital raising later.  Of the 374 funds on the road, 138 have already had interim closes.  It's worth noting that the fundraising figures above only include final closes, not interim closes.

Distressed and debt investing is a very popular theme in the real estate private equity market today, with 134 of the 374 funds in the market focused on this strategy. 

Capital raising activity in funds targeting Asia and Rest of World accounted for 25% of all real estate private equity fundraising in 2008, but so far in 2009 funds targeting this geography account for only 9% of capital raised.

Overall, fundraising is expected to increase in the medium to long term.  According to Preqin's survey, a "significant number" of investors plan to return to the market in late 2009 or early 2010.