Doughty Hanson has cut the target for its latest real estate fund by about 60% after spending two years on the road without holding a first close, according to two people familiar with the situation.
They said the firm had been targeting €500m, and then cut that to €200m, and have so far only gathered about €40m in soft commitments – where an investor agrees in principle to participate in the fund – from two investors.
In contrast, Doughty’s second real estate fund closed at €560m in early 2006 after just over a year of marketing.
Discussions on its latest Doughty Hanson Co-European Real Estate Fund III began with investors in late 2010.
One investor said that the departure of real estate co-head Edward Bates early last year had an “unsettling” effect on the fund effort: “If you lose people integral to the operation during the marketing period, it naturally makes you wary of more departures and concerned over who is being entrusted with the capital.”
Doughty declined to comment but a person close to the situation said that the decision to cut the size of the fund had been made because the climate is difficult rather than any specific difficulties within the firm.
The source said that the previous fund, which contains assets such as the Prado Shopping Centre in Marseille, France, was valued above cost.
The news comes as the firm begins preparations for launching its latest buyout fund – Doughty Hanson VI – in the New Year.
The new effort is the first to be launched since the death of co-founder Nigel Doughty in February. The tragedy prompted a restructuring of the group with the management company moving from a limited company to a limited liability partnership and new reporting lines established across the business.