This report analyzes StepStone data to identify liquidity trends among non-core real estate funds. These funds have been materially impacted by recent interest rate spikes, which have led to value declines and overleveraged balance sheets.

Distributions to investors have fallen substantially below normal. Market-wide transaction volume is down, and sales of assets owned in non-core funds are down even further, leading to longer hold periods and higher loss ratios.

At the same time, capital calls have recovered to normal levels because with longer hold periods, assets typically require more money, and with value declines, assets need to be de-levered.

Against this backdrop, fundraising is taking longer and proceeds are lower. Small and medium size managers are struggling more as institutional investors are increasingly favoring larger managers.

StepStone’s Real Estate Liquidity report draws from SPI by StepStone, our proprietary database, which tracks over 3,750 real estate managers and 8,650 funds. In addition, the work is informed by the on-the-ground insights of our global investment and advisory teams, with total capital responsibility for $184 billion.

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