Fundraising by closed-ended real estate-focused debt funds had reached more than $23.2 billion by the end of the third quarter of 2016, according to data from PDI Research & Analytics.
This means that more capital has already been collected this year than in the whole of 2015, when a total of $22.4 billion was raised. At 40, the number of funds that closed in the first three quarters of this year was the same as the number that closed in the whole of last year.
However, the 2016 end-year total is unlikely to match the record year of 2013 when $37.4 billion was raised by 48 funds.
With the banks having their activities constrained by balance sheet pressures and regulation following the global financial crisis, the theory is that debt funds have increasingly moved in to fill the gap in recent years.
Our data lends support to the theory. Between 2010 and 2012 the average annual amount raised by real estate debt funds was $14.3 billion. Between 2013 and 2015, this average figure more than doubled to $29.7 billion.
Two funds have accounted for a substantial proportion of the total amount raised so far this year: Lone Star Real Estate Fund V, which closed on $5.8 billion in April; and Blackstone Real Estate Debt Strategies III, which was wrapped up on $4.5 billion in August.
Last week, PDI reported that total private debt fundraising in 2016 would struggle to match last year’s total. In the first three quarters, $67.4 billion was raised compared with $106.3 billion in the whole of 2015.