Debt vehicles deliver robust performance. Investors and managers target multi-country and senior debt strategies
17 November 2020, Amsterdam – Non-listed real estate debt products continue to attract attention from institutional investors and investment managers, with a record high of €32 billion raised globally in 2019, according to the INREV Debt Vehicles Universe 2020 study*.
This reflects a strong uptick in demand for non-listed real estate debt, representing a circa 50% increase on the 2018 results and is significantly higher than in any given year since INREV records began in 2013. According to the global Investment Intentions Survey 2020, investors in North America and Asia pacific have a strong preference for non-listed real estate debt strategies. In Europe, where the private debt market is still immature – it is not yet in the top three preferred strategies for investors in this region – but it is growing strongly.
Debt vehicles posted strong performance expectations in 2019, with the average target IRR for all vehicles of 7.7%. Vehicles with a senior loan strategy targeted an average IRR of 6.8%, while those adopting riskier, subordinated loan strategies recorded a target IRR of 10.3%.
Vehicles with a mixed loan generation strategy dominated the composition of the universe, accounting for 33 of the total number of 80, with a combined target equity of €31 billion. Almost as many vehicles (32) adopted a direct lending strategy, with a combined target equity of €11.8 billion. However, these tend to be significantly smaller in size with an average target equity of around €370 million.
The study also reveals the predominance of vehicles focused on a senior debt strategy, which accounted for 51.3% of the total universe and a total target equity of €30 billion. By contrast, subordinated strategies (such as mezzanine and junior debt) made up less than 20% of the total, be it by number, target equity or target GAV.
In terms of geographic strategy, debt vehicles with a multi-country: pan- European strategy occupied a pre-eminent position, accounting for €26 billion (74%) of the total target equity. Single country: Western European debt vehicles were the second largest group accounting for €8.3 billion. Debt vehicles with a multi-country strategy tend to be larger relative to the single country structures. And of the single country group, vehicles with a focus on the UK accounted for 33 out of the total of 42 with €12.9 billion in target equity.
Iryna Pylypchuk, INREV’s Director of Research and Market Information, said: ‘These data point to a general uptick in investor interest in real estate debt vehicles latterly, and judging from the latest announcements capital raising activity for debt strategies continues strongly. We believe the INREV Debt Vehicles Universe study already delivers greater transparency of, and insight into, the non-listed real estate debt space for market participants.
However, our longer-term aim is to continue to build coverage and to create the very first European private debt vehicles performance index to enable a more comprehensive analysis of the market as it continues to evolve.’
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Notes to Editors
*About INREV Debt Vehicles Universe 2020
The INREV Debt Vehicles Universe 2020 is a live database which captures information about the non-listed real estate debt market and is one of the key sources feeding into the INREV Debt Vehicles Universe study. It currently includes 81 vehicles, with a total minimum target equity of €48.9 billion and a minimum target GAV of €47.8 billion. Since the 2019 edition was published, seven new funds have been added to the database, while four have been deleted due to liquidation.
The INREV Debt Vehicles Universe study is published annually in October, since 2013. The latest study has been expanded to also include debt funds related survey data, covering capital raised, assets under management and investment intentions for debt vehicles globally.
The INREV Debt Vehicles Universe covers vehicle level data submitted to INREV by investment managers. Debt vehicles data is collected via the INREV Data Platform, where users are able to register their vehicles and provide their strategy information including their loan strategy and target IRRs. Furthermore, the study references findings from other sources, including the ANREV / INREV / NCREIF Capital Raising Survey 2020 and Fund Manager Survey 2020, and the ANREV / INREV / PREA Investment Intentions Survey 2020.
INREV, the European Association for Investors in Non-Listed Real Estate Vehicles, was launched in May 2003 as a forum for institutional 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 €2.8 trillion and INREV members deliver €385 billion of stimulus to the real economy of Europe.
INREV has 461 members which include 86 of the largest institutional investors as well as 69 of the 100 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.