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Carlyle raises €2.2bn European property fund

The firm has up to €9 billion available with leverage for its third European real estate fund, making it one of Europe’s largest private equity real estate funds.

The Carlyle Group has closed its third European real estate fund, Carlyle Europe Real Estate Partners III, on €2.2 billion ($3.4 billion).

The new fund will closely resemble Carlyle’s previous European property fund, CEREP II, in targeting six core markets: Iberia, France, Germany, Italy, Scandinavia and the UK. However this fund will broaden its remit to Eastern Europe. Robert Hodges, Carlyle’s head of UK real estate and European asset management, said the fund is particularly interested in looking for deals in Bulgaria, and is in due diligence on a property there now.

The new fund has also expanded its investor base geographically from the previous fund, attracting new institutional investors from the US who had previously only invested in US-focused funds with Carlyle. “That has been a new development for us,” said Hodges. “Before, the biggest investor group was European. Now they are probably equaled by Americans.

The fund has already committed €715 million to 10 assets. Those investments include a 158,000 square meter residential building in Copenhagen, a 79,000 square meter high-rise office development in Paris’s La Defense, the renovation of a 42,000 square meter shopping complex in Aranjuez, Spain and the purchase of a portfolio of 11 office, residential and retail buildings in Stockholm comprising 114,000 square meters of space. The firm is targeting opportunities across all property sectors.

Carlyle’s two previous European real estate funds, the €427 million CEREP I and the €763 million CEREP II, have invested a total of €1.8 billion in 65 assets since 2001. In Europe the firm has focused its investment on single assets of more than €25 million. It has teams based in Paris, London, Frankfurt, Madrid, Milan, Luxembourg and Stockholm. With leverage, the pan-European team of 46 people will have maximum funds of approximately €9 billion to invest. 

Raising such a large fund at a time when people are raising questions about opportunities in the property sector in Western Europe is a big show of confidence in the sector, particularly coming from US investors. “Today it’s a very difficult market, values have been falling pretty much across the board,” said Hodges. “I don’t deny it’s a very difficult market out there, in some areas it’s difficult to see where the bottom is. But that environment in itself offers us a huge opportunity. There’s possibilities of getting product in the market today that we couldn’t get anywhere near 12 months ago. I think we’re going to find motivated sellers, attractive deals, and get into prices where we feel there’s some real value.”

With the closing of the fund, the Carlyle Group now manages $10.8 billion in ten real estate funds across the world, including €3.4 billion of assets under management in Europe.  The total anticipated capitalisation of the global real estate portfolio is €20.3 billion, including committed equity and debt, of which €8.6 billion is in Europe. The firm ranked 7th by size in the recent PERE30 ranking of the largest private equity real estate firms in the world, featured in the May issue of PERE magazine. The firm now manages a total of $81.1 billion in 60 funds across all its strategies.

The fund will stand as one of the largest raised for Europe. In 2007, ProLogis European Properties Fund II closed on €3 billion ($4.6 billion) of commitments from 21 investors.