Companies and funds reported raising $8.34 billion in October for real estate-related investments and financing. The amount raised brings the total inflow for the first nine months of the year to $79.28 billion from approximately 1,461 funds and firms.
CoStar Group tracks the fundraising activity of almost 2,000 entities on an ongoing basis and adds about 125 new entities per month.
For October 16 different funds and firms reported raising $3.88 billion earmarked for debt repayment; another 20 entities raised $1.45 billion for non-property-related investments, including debt, mortgage or securities purchases.
That leaves approximately $3.01 billion of the money raised available for property investments. At a conservative 65% loan-to-value ratio, the money raised in October that could go towards property purchases would generate about $9 billion in buying power.
Property sales of $1 million or more have totaled more than $15 billion in both September and August, according to CoStar Group's COMPs database. (Additional October sales deals may be tallied as they are confirmed by CoStar's research or included in public records. However, so far CoStar has verified more than $15 billion already in such sales.)
Of the total amount raised in October, $4.82 billion was from publicly offered shares in REITs and real estate operating companies with $3.88 billion specifically to be used debt repayment or refinancing. The other $3.5 billion came from private fund raising efforts and is all earmarked for new investment.
Pooled investment funds including private equity and hedge funds raised $1.82 billion far outpacing the $730 they raised in September, the lowest monthly amount for such funds this year.
The highest percentage of funds raised (approximately 28%) was earmarked primarily for office-related investments. Funds targeting lodging and resort investments raised 23% of the total; funds targeting debt/mortgages raised about 22% of the total. Multifamily-related amounts equaled about 9% of the total; retail, 7%; industrial 5% and health care about 3%.
The top three money raisers in October were MGM Resorts International, Brickman Associates and National Real Estate Advisors.
MGM Resorts International issued 40.9 million shares of its common stock for total net proceeds of $512 million. MGM also issued $500 million of senior notes. The company is using the net proceeds of both offerings to retire the $1.2 billion in commitments under its senior credit facility, which were scheduled to mature in October 2011. Then just this week, MGM sold another $76.8 million in common stock for the same purpose.
Brickman Associates, a New York-based real estate private equity firm, reported raising $754 million in four different funds. The funds invest in both debt and equity in office, hotel, multifamily and retail properties. Technically, the funds have been in operation for the about four years, but the amounts raised were only officially reported last month to the U.S. Securities & Exchange Commission. Brickman has invested more than $3 billion of total capital in more than 70 real estate transactions throughout the U.S. in its 18-year history.
National Real Estate Advisors in Washington, DC, is a newly formed real estate investment manager of the National Electrical Benefit Fund (NEBF) and is wholly owned by NEBF itself. The group reported raising more than $643 million last month. One of its newest investments was a $17 million first mortgage loan to finance the renovation of the property at 1201 Chestnut St. in Philadelphia into apartments.
Other Successful Fund Raising Highlights
Associated Estates Realty Corp., a multifamily REIT in Cleveland, raised about $120 million through the sale of common stock that it intends to use to fund property acquisitions and repay debt. The firm has completed two other offerings this year one in January and one in May.
Campus Crest Communities Inc. in Charlotte, NC, completed its initial public offering last month raising nearly $355 million. The company will be using the net proceeds primarily to acquire interests in student housing properties and repay debt.
CBL & Associates Properties Inc. in Chattanooga, TN, closed a $102 million public offering of preferred shares. It intends to use net proceeds to reduce outstanding borrowings under its credit facilities
Chesapeake Lodging Trust in Annapolis, MD, completed a public offering of common shares, raising approximately $140.5 million of net proceeds. The REIT intends to use the money to repay debt under its revolving credit facility and for hotel investments. It focuses primarily on upper-upscale hotels in major business, airport and convention markets.
DuPont Fabros Technology Inc. in Washington, DC, sold preferred shares raising $185 million. It intends to use the net proceeds to pay off debt and complete current projects under development.
Ellington Financial LLC, a New York-based finance company specializing in acquiring and managing mortgage-related assets, raised $100 million in a common stock offering. Ellington intends to use a substantial portion of the net proceeds from the offering to acquire non-agency and agency residential mortgage backed securities.
Hersha Hospitality Trust, a Philadelphia-based owner of upscale, mid-scale and extended stay hotels in major metropolitan markets, raised $145 million through the sale of common stock. The REIT intends to use the bulk of proceeds to repay debt.
Host Hotels & Resorts Inc. in Bethesda, MD, sold $500 million in senior notes. The net proceeds will be used to redeem notes coming due 2013 and for future acquisitions.
Invesco Mortgage Capital Inc. in Atlanta completed a common stock offering that raised $286.4 million. The company expects to use the net proceeds to make additional acquisitions of residential and commercial mortgage-backed securities and mortgage loans.
Investec in Santa Barbara, CA, raised $130 million for acquisition of grocery- and drug-anchored centers along the coast of California. Investec’s director of acquisitions Grant Harris reported that Investec is currently negotiating the acquisition of two retail properties and is actively seeking additional opportunities.
LNR Property LLC in Miami launched a new $200 million fund as part of its new investment management platform. The fund will focus on investing commercial real estate debt.
Post Properties Inc. in Atlanta sold a public offering of $150 million of senior unsecured notes due 2017 that will be used to redeem other outstanding debt.
Public Storage in Glendale, CA, raised $120 million through the sale of preferred shares to be used for debt repayment.
Regency Centers Corp. in Jacksonville, FL, sold $250 million of senior unsecured notes due in 2021. Approximately $35 million of the net proceeds will be used to settle an existing interest rate swap and the remaining portion will be used to pay down its line of credit.
SL Green Realty Corp. in New York sold $300 million of senior notes due 2017 that will be used to redeem other outstanding debt.
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Mark Heschmeyer