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Carlyle Group Raises $5.5 Billion for Eighth U.S. Real Estate Fund, Exceeding Target

Fundraising Signals Strong U.S. Demand for Higher-Risk Investment Strategies
September 11, 2018
The Carlyle Group purchased the 144-unit Brookside Apartments in Boulder, Colorado, earlier this year for $51 million.



Global alternative asset manager Carlyle Group's eighth U.S. real estate fund, focused on opportunistic targeted investments across the United States, closed after raising $5.5 billion, exceeding its target of $5 billion in a sign of strong demand for higher-risk strategies.

With the search for higher returns increasing, opportunistic private real estate funds keep growing in interest to investors. Twenty percent of active investors were targeting opportunistic funds in June 2018, a strategy that's not far behind their investment in Class A property in major metropolitan markets at 22 percent, and higher level trophy properties at 30 percent, according to Preqin, a private equity data provider.

This is the latest and largest in Carlyle’s U.S. real estate fund series, with Carlyle's previous fund closing in 2014 at about $4.6 billion.

The fund attracted capital from about 90 investors both foreign and domestic, according to federal regulatory filings. The Commonwealth of Pennsylvania Public School Employees’ Retirement System was one of the early investors in the fund, committing $200 million.

Consistent with previous funds, Carlyle Realty Partners VIII's principal objective will be to achieve significant long-term capital appreciation, according to Commonwealth records. The fund will focus on the acquisition, development and redevelopment of well-located institutional-quality assets that are either undermanaged, undercapitalized or both. Carlyle will seek opportunities to improve net operating income and property value through renovations, repositioning and re-tenanting.

Investments are expected to be made through various methods, including direct property acquisitions, joint venture transactions, preferred equity and/or mezzanine loan investments.

Carlyle typically focuses its investment on single-property deals using a modest amount of leverage, according to Commonwealth. In its three most recent funds, Carlyle's weighted average loan-to-value has ranged from 41 percent to 55 percent.

The fund, known as CRP VIII, intends to invest in sectors including multifamily, active adult living, office, retail, industrial, multifamily and hotel, self-storage, senior housing, life sciences, manufactured housing and student housing. Multifamily and active adult in particular are expected to have strong weighting in the fund.

Carlyle’s current primary target markets include New York City, Washington, D.C., southern and northern California, Atlanta, Boston, Chicago, and Seattle.

As of June 30, Fund VII had already invested $495 million in properties, according to a Carlyle Group financial filing.

Since raising its first U.S. real estate fund in 1997, Carlyle has invested $14.6 billion in 747 investments. Carlyle is one of the largest private equity investors in U.S. real estate, with $17 billion of assets under management as of June 30.

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