Real estate pricing jumps amid sales of younger vintages – Setter

Average top pricing for real estate stakes is up nine percentage points year on year, while buyout and VC funds have had declines.

The price of a stake in a real estate fund is nine percentage points higher than it was a year ago, according to a September price report published by intermediary Setter Capital.

Real estate funds swapped hands for an average top price of 92.3 percent of net asset value in the three months to 30 September, compared with 83.2 percent in the same period a year ago, the report found. This is based on bids or price indications made on 264 real estate funds covered by Setter.

By vintage, real estate funds of 2010-vintage or later attracted bids of 95.7 percent of NAV, 2006-2009 for 81.3 percent and pre-2002 vehicles attracting an average top bid of 72.4 percent.

“Over the last few years the majority of real estate secondaries were 2007/pre-crisis funds, which tend to price at discounts,” said Mike Evans, a vice-president and member of Setter’s LP advisory team. “Recently, sellers have been offering post-crisis, higher quality funds that price closer to par.” This, as well as high levels of dry powder, have also led to higher pricing, he added.

Turnaround funds attracted the highest pricing at 100.6 percent of NAV.

Venture capital funds had the biggest drop with a 7.4 percent fall, while special situations had the biggest increase with an 11.6 percent rise, year on year.

Buyout had a 1.6 percent decline to 96 percent of NAV. The average price of infrastructure stakes rose 0.63 percent. The average top price for infrastructure funds was above that of buyout funds in the three months to 30 September, with 98.9 percent of NAV versus 95.9 percent.

The average top price is derived from prices that Setter observed over the preceding 90 day period through actual bids or indications given by more than 1,800 buyers, according to the report.