Chart of the week: Private real estate debt fundraising in North America

The private debt real estate market is still struggling at end of Q2 2015


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This week’s chart focuses on private debt fundraising in the North American real estate market. The 2005-2006 housing bubble and the 2007-2009 subprime mortgage crisis deeply affected the real estate markets.

Fundraising peaked in 2008 and 2009, with a significant number of funds raised specifically for the fallout caused by the financial crisis. This included the two TCW Special Mortgage Credits Funds closed by TCW Group in 2008 and 2009, raising $3 billion each. This was followed by a sharp decrease in aggregate capital gathered in 2010 and 2011 after investors’ trust in credit funding was eroded. Our data confirms this: out of the total amount raised in 2011, 34 percent was allocated to distressed debt strategies, and 54 percent to mezzanine and senior debt. Over the period ranging between 2008 and 2011, the statistics are even more significant: 43 percent of funds raised targeted distressed debt opportunities, while mezzanine and senior debt constituted 46 percent of the total. To contrast this with the more recent data, the funds closed over the period between 2012 and 2015 account for only 19 percent of funds focused on distressed investments, against 64 percent for mezzanine and senior debt strategies.

The chart shows that the North American real estate market and investors’ appetite have been slowly improving after the 2011 low, but conclusions are hard to draw as the recovery remains shy. For example, fundraising in 2014 was 45 percent lower than the amount amassed in 2013, as real estate markets slowly recover. However, as at June 2015, there are currently 53 funds being raised targeting a total of $14.3 billion. Data gathered during the second half of 2015 will help decide between the two trends.