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Private RE fundraising cools in first quarter after heated 2016

Closed-end private real estate fundraising slowed in the first quarter after a robust year of fundraising in 2016.

In sum, 38 real estate funds globally commanding $15 billion reached a final close during the quarter, the research firm Preqin said. The first quarter tends to be a relatively weak period for fundraising, and the 2017 figure could rise by roughly 10% as more data comes in.

By comparison, 72 real estate funds raised $32 billion in the 2016 fourth quarter, and 82 funds raised $26 billion in the 2016 first quarter.

Value-added and opportunistic funds were the preferred investment strategies during the first quarter; 17 value-added funds raised $6.9 billion, and 10 opportunistic funds raised $4.0 billion.

Private real estate fund managers' dry powder rose to a record $245 billion at March 31, from $237 billion at the end of 2016. Andrew Moylan, head of real estate products, said in a release that the fundraising environment remains "encouraging" despite increased competition. This year could wind up being as fruitful as 2016, he said, citing the multi-billion dollar funds now in-market.

"Several have already held interim closes, and may well be on course to reach a final close before the end of the year," Moylan said.

The distressed fund Cerberus Institutional Real Estate Partners IV, at $1.8 billion, was the largest fund to reach a final close during the first quarter.