The District's K street

WASHINGTON, DC–Private equity capital-raising continues to flourish as illustrated by two local area investors, which separately announced respective fund closings of commercial real estate funds. We will get to those in a minute but first we note that the announcements came as London-based Preqin released its initial survey of fundraising in Q3. Its top line observation was that capital continues to be increasingly concentrated among fewer firms with Q3 followed Q2 in marking the lowest number of funds to reach a final close since 2003.

The local investors that announced closing are Chevy Chase, Md.-based Federal Capital Partners and Washington DC-based ASB Real Estate Investments.

FCP closed its Realty Fund III, a $512.1 million fund targeting multifamily and commercial properties and structured opportunities throughout the Eastern US. With leverage its investments will come to about $1.7 billion. Fund III has already closed 20 investments committing $332.4 million of fund equity for a total value of $1.1 billion.

ASB executed its final close for the ASB Meridian Real Estate Fund, II, the second in its series of low-leverage value creation closed-end funds. ASB has raised $171 million for Meridian Fund II.  The fund seeks value creation opportunities in growing urban/infill submarkets, mostly in 24-hour gateway cities.

There are currently 513 private real estate funds in market, targeting $182 billion  in investor capital, which suggests that no one fund will fit perfectly within the sector's trends. That said, Preqin's report about fundraising activity is worth noting.

It found that private real estate fundraising declined slightly in Q3 with 32 vehicles securing $19 billion in investor capital. However, this is just an initial impression: Preqin expects these figures to rise by 10-15% as more information becomes available.

As noted above, Preqin also reported that capital continued to be increasingly concentrated among fewer firms.

Debt strategies attracted the highest level of capital through Q3 with four funds securing $5.5 billion; these include the largest fund closed in the quarter, Blackstone Real Estate Debt Strategies III, which raised $4.5 billion. Three core funds raised $3.5 billion through Q3, their highest quarterly fundraising total since Q1 2015, while value added strategies secured $3.7 billion with 13 funds closing.

Opportunistic funds saw their lowest quarterly fundraising total since Q3 2011, securing $3.2 billion in investor commitments, although the strategy did raise $18 billion in Q2, Preqin said.