High risk private equity funds may be coming back into style after a tough few years. Since the financial crisis, firms have run into trouble raising the capital needed for new real-estate funds. However, private equity giants TPG Capital, KKR, and Carlyle Group have demonstrated interest in and taken steps toward launching real-estate focused funds. Carlyle Group is preparing for a multi-billion dollar real-estate fund with plans to raise up to $4 billion. The fund would qualify as the largest property fund since the financial crisis and the burst of the real-estate bubble.
Carlyle is hoping to benefit from a surge in positive publicity from its recent sales of trophy assets at high profits. The firm and its partners reached an agreement late last month to sell the 27-story Manhattan office building at 650 Madison Ave. for $1.3 billion, or about $500 million more than the firm spent buying and fixing up the property.
Carlyle invests in a wide range of asset types, including corporate private equity, debt and energy. Real estate makes up only $13 billion of its total portfolio. Carlyle tends to buy single buildings, less often acquiring large property portfolios as some of its peers such as Blackstone Group or Starwood Capital Group. Source
Carlyle has had seven real-estate focused funds since 1997, the largest of which topped out at $3 billion. The private equity giant, with $176 billion in assets under management, will hope to capitalize on a renewed confidence in the real estate market and the rising prices of homes.