Downturn Puts Squeeze on Fund Operators
After years of strong performance, the real estate fund industry is taking some lumps.
The number of high-yield funds is declining for the first time in at least a decade. Real Estate Alert's annual fund review has identified 466 active or planned closed-end vehicles, down from a peak of 520 in September. More than 50 planned funds were canceled or put on hold in the past six months.
The economic downturn has caused investors to pull back, forcing operators to lower their equity goals for new vehicles. Meanwhile, crumbling property values have led to big writedowns on investments made when the bull market was peaking. Fund sponsors have reacted by increasing their focus on investments in distressed debt. Some are reducing fees in a bid to attract capital.
The fund review is in a 40-page special report accompanying this week's issue. It includes a master list of funds, a breakdown of vehicles by type, and lists of canceled, postponed and downsized funds.