(Adds year-ago comparisons, Vornado report, byline)

By Ilaina Jonas

NEW YORK, July 7 (Reuters) - Fund-raising by real estate private equity firms reached a 5-year low in the second quarter as investors remained worried about falling values, according to alternative asset research firm Preqin.

Sixteen funds dedicated to real estate investment raised a total of $8.9 billion, the lowest quarterly total since the 2004 third quarter, when 22 private equity real estate funds raised $8 billion, the UK-based firm said in a report released on Tuesday.

"With many investors still unable to commit new capital, and with other investors more cautious towards the market following significant write-downs in value for existing investments, fund-raising will remain an extremely challenging task in 2009," the report said.

Fund-raisers have also lowered their targets by $28 billion over the past three months, and in some cases have shelved or abandoned their funds altogether.

So far this year, 36 real estate funds have been abandoned or put on hold, compared with 25 funds in all of 2008, the report said.

Funds focused on Europe represented the biggest group in terms of value raised, with five funds raising a total of $5.3 billion. That's down from 12 funds and $9.2 billion a year earlier.

About 3.1 billion euros ($4.32 billion) of that was attributed to the Blackstone Real Estate Partners Europe III, the largest fund to close so far this year, Preqin said.