Carlyle closes door on Europe’s largest real estate fund

US private equity outfit the Carlyle Group has closed its third European real estate fund, raising €2.2bn and smashing its original target size of €1.5bn

Combined with leverage, the London-headquartered team will have around €9bn to invest, and has already started, having committed €715m to 10 assets. Carlyle Europe Real Estate Partners III (CEREP III) is Europe’s largest private equity fund dedicated to real estate investment.

“To have raised a fund of this scale, which exceeded our original target by a significant margin, underlines the continued confidence of investors in both the potential of real estate markets across Europe and Carlyle’s ability to deliver superior returns. Our network of local country investment and asset management teams is an attractive proposition for investors, whose preference is to invest in vehicles where they can achieve focused asset class and pan-European geographic diversity through a single fund, rather than on a country-by-country basis,” said Eric Sasson, head of Carlyle’s real estate operations in Europe.

Carlyle now manages US$10.8bn across 10 real estate funds globally, with €3.4bn of European assets under management. The firm invests in all types of real estate with a focus on office, retail, hotel and residential assets in Western and Central Europe. The first two European funds raised €427m and €763m chronologically, and a total of €1.8bn has been invested in 65 assets since 2001.

The European real estate team is made up of 46 professionals based in Paris, London, Frankfurt, Madrid, Milan, Luxembourg and Stockholm. It invests in single assets of more than €25m, targeting those which are in need of repositioning, and are often sourced through public or corporate disposals, where there is strong underlying potential for value creation. The firm develops new buildings or transforms existing assets into higher specification properties.

Private equity interest in property has taken off over the last 18 months and Carlyle’s last effort in this space comes just weeks after fellow US giant Apollo Management launched a US$1bn European real estate debt fund.

According to statistics released by Private Equity Intelligence, private equity real estate funds are on course to raise more than US$100bn in 2008. In the opening quarter of 2008 alone, US$25bn has already been raised, with Blackstone Real Estate Partners VI becoming the largest fund of its type ever raised with US$10.9bn.