3 September 2018, Amsterdam – Ninety-two European closed end non-listed real estate funds are set to terminate over the next 10 years, releasing a potential €20.9 billion of assets back into the market, according to the INREV Funds Termination Study 2018.
Between 2018 and 2020, 44 funds with a combined AUM of €9.6 billion are due to close. The peak of activity is anticipated in 2022, when 22 funds could be wound up.
Funds with a retail strategy outnumber those in all other single sectors earmarked for termination between now and 2020, accounting for €5.0 billion. At a time when retail is facing multiple challenges, liquidation of these funds could add further pressure to the sector.
Half of the single country funds scheduled for termination in 2019 target the UK. The looming Brexit deadline could therefore coincide with the release of around €337.8 million. In total, €2.1 billion of UK assets may be brought to the market over the coming three years.
Current market circumstances emerged as the most important reason for terminating funds – quoted by 65.2% of the study’s respondents. Prevailing market conditions are also seen as a key factor in the decision to extend a fund.
Liquidating was cited as the preferred termination option, though this varied according to style. Core and opportunity funds opted for liquidation and extension in equal measure, whilst the majority of value added funds went for liquidation.
Value added and opportunity funds were more likely than their core peers to consider options other than liquidation, extension and rollover, such as IPO or merger.
Lonneke Löwik, INREV’s CEO, commented: ‘This study reveals intriguing insights, but context is always important. While it might be tempting to consider Brexit as a driver for fund terminations in the UK, seven years ago no-one could have predicted today’s political landscape; and there’s no reason why capital won’t return to the UK. The trend away from retail, however, may be longer lasting.’
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Notes to Editors
About the Funds Termination Study 2018
The INREV Funds Termination Study examines preferred termination options of European closed end non-listed real estate funds, including continuation strategies and the impact of current market conditions on termination decisions.
The study was launched in 2007 and is published once a year.
This year’s study includes 248 closed end vehicles managed by 91 managers from the INREV Vehicles Universe. Collectively these vehicles represent a total Net Asset Value (NAV) of €50.0 billion. Of these 248 vehicles, 92 funds are due to terminate in the coming decade (2018 to 2027). This group represents total NAV of €20.9 billion.
INREV, the European Association for Investors in Non-Listed Real Estate Vehicles, was launched in May 2003 as a forum for investors and other participants in the growing non-listed real estate vehicles sector. The association represents and reflects an industry with a total value of €2.7 trillion and INREV members deliver €300 billion of stimulus to the real economy of Europe.
INREV has 431 members which include 75 of the largest institutional investors as well as 40 of the 50 largest real estate fund managers, plus banks and advisors across Europe and elsewhere.
The non-profit association is focused on increasing the transparency and accessibility of non-listed vehicles, promoting professionalism and best practice, and sharing knowledge. It is based in Amsterdam, the Netherlands.