In a sign of the rising fortunes of private equity real estate funds, a Goldman Sachs $2.5 billion mezzanine fund has competed its largest deal to date.

According to Deal Journal, the fund has teamed up with GIC, a Singaporean sovereign wealth fund, to loan $481 million to Blackstone Group. The funds will be used as part of a recapitalization of the deal inked in 2006 that saw Blackstone and a partner buy Trizec Properties, a California-based REIT. This is an indication that the real estate financing and purchasing business has staged a recovery of sorts. Valuations were hit hard in the aftermath of the financial crisis, and a lot of funds suffered.

Goldman Sachs' Whitehall funds have been basically inactive--until now. About half of the 2008 mezzanine fund has been invested. But we are seeing a lot more deals this year, and the confusion over the European debt and U.S. downgrade situation hopefully will not short circuit this rebound. And that has more private equity firms raising capital.

There seem to be many more companies in fund-raising mode right now, certainly more than last year. There have been some changes to the industry, as this is much less of a sellers' market than before. Potential limited partners will likely be struck by the better terms they are offered this time around, mainly in the form of lower management fees and perhaps lower performance fees. All this said, a lot of 2007-2009 funds are still being wound down. Most funds allow for a three-year investment window.

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