The global real estate secondaries market appears to be on a sustained growth trajectory with another record year in 2014, according to data from Landmark Partners.
Landmark estimates that real estate secondaries transactions last year totaled approximately $4.8 billion – a $1.1 billion rise on the $3.7 billion recorded in 2013 and the sixth consecutive record year.
The firm believes that pension plans were the most active sellers, as was the case in 2013. It says US plans accounted for 20 percent of volume while non-US plans accounted for 18 percent, the majority of those being from Europe. “Pension funds continued to rebalance portfolios and reduce the number of non-core GP relationships,” said the company.
The global real estate secondary deals tracked by Landmark were measured by net asset value at the time of the sale and included those flagged to the firm by other market participants. The volume explicitly did not capture LP-LP trades, however. Neither did it capture single asset real estate joint venture partnerships and other private non-fund vehicles, so the overall volume could be significantly higher than $4.8 billion.
In total, the aggregate global volume comprised 92 transactions compared to 57 in 2013. GP-led “liquidity solutions” accounted for 27 percent of the total volume. This was the result of an increased number of GPs exploring ways to wind down or recapitalise mature funds, according to the firm. The geographical distribution of assets sold revealed that US and European focused funds constitute approximately 47 percent and 38 percent of total volume, respectively, while Asian real estate partnerships amounted to 11 percent.
The majority of sellers were located in US, followed by Europe, Asia and the Middle East. Also, endowments and foundations appeared to have made a more concerted effort to manage their real estate portfolios, opined Landmark, as demonstrated by their participation as active sellers. Their activity almost doubled from 13 percent in 2013, to 24 percent in 2014.
Meanwhile, banking institutions and insurance companies remained relatively close to the previous year’s figures, comprising 22 percent of transaction volume, as they continue to address regulatory and balance sheet objectives.
Looking ahead, Landmark did not find any indication that volume would taper off in 2015. “The record-breaking growth of the secondary market for real estate is expected to continue in 2015 as institutional investors of all types increase their usage of the secondary market to actively manage their real estate portfolios,” said the firm.