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Carlyle Group raises EUR2.2bn for Europe’s largest private equity real estate fund

International private equity firm the Carlyle Group has closed its third European real estate fund, Carlyle Europe Real Estate Partners III, with EUR2.2bn, compared with an initial target

International private equity firm the Carlyle Group has closed its third European real estate fund, Carlyle Europe Real Estate Partners III, with EUR2.2bn, compared with an initial target of EUR1.5bn, underlining ongoing strong demand for pan-European real estate investment.

With leverage, the 46-strong pan-European team will have maximum funds of some EUR9bn to invest, vehicles, and has already committed EUR715m to 10 assets. Carlyle closed its first real estate fund in the US in 1997 and since then has sponsored a further 10 real estate funds in the US, Europe, Asia and Latin America, with assets totalling USD10.8bn. The total anticipated capitalisation of the global real estate portfolio is EUR20.3bn, including committed equity and debt, of which EUR8.6bn is in Europe.

Carlyle invests in all real estate asset classes, with a concentration on office, retail, hotel and residential assets across Western and Central Europe. Carlyle’s two previous European real estate funds, Carlyle Europe Real Estate Partners I and II, which raised EUR427m and EUR763m respectively, have invested a total of EUR1.8bn, including reinvesting capital and co-investment, in 65 assets since 2001.

The firm’s strategy is to identify real estate assets that need repositioning, often sourced through public or corporate disposals, where there is strong underlying potential for value creation, and develops new buildings or transforms existing assets into higher specification properties.

In Europe, Carlyle invests primarily in single assets with a value exceeding EUR25m in areas including the office, residential, hotel, retail, logistic and industrial sectors, and considers mid-size corporate transactions involving portfolios or assets that are not performing to their full potential. As well as equity investments, the fund may also invest in debt-based instruments.

‘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,’ says Eric Sasson, head of Carlyle’s real estate operations in Europe.

‘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.’

Robert Hodges, Carlyle’s head of UK real estate and European asset management, adds: ‘The volume of funds raised allow us to continue our efforts in the UK, where we see a growing number of investment opportunities in today’s market. We plan to expand our London and regional office portfolio of developments, similar those we have in the City, Birmingham, Manchester, Oxford, Bristol and Edinburgh.

‘It will also allow us to seize opportunities in other sectors such as high-quality retail assets where we believe value can still be created. We will continue to pursue our strategy of identifying opportunities to add value by combining the entrepreneurial approach of our management team with those of our joint venture partners, and through the use of high quality products for sustainable urban development.’

The European real estate operation of the Carlyle Group, Carlyle Europe Real Estate has been advising on investments throughout Europe since 2001 through offices in Frankfurt, London, Madrid, Milan, Paris and Stockholm, which also advise on the investments of the Luxembourg-based Carlyle Europe Real Estate Partners I and II funds, which total EUR3.4bn in assets under management.

The group has a total of USD81.1bn under management committed to 60 funds. Carlyle invests in buyouts, venture and growth capital, real estate and leveraged finance worldwide, focusing on aerospace and defence, automotive and transportation, consumer and retail, energy and power, financial services, healthcare, industrial, infrastructure, technology and business services and telecommunications and media.

Since 1987, the firm has invested USD43bn of equity in 774 transactions for a total purchase price of USD229.3bn, and employs more than 1,000 people in 21 countries. In aggregate, Carlyle portfolio companies have more than USD87bn in revenues and employ more than 286,000 people worldwide.

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