European real estate funds set to release €9.6bn of assets over next three years

Close to €10bn (£8.6bn) of assets owned by European real estate funds could be released to market over the next three years, according to the latest INREV Funds Termination Study. It found that 34 European closed-end, non-listed real estate funds will terminate between 2022 and 2024 and that, as a result, €9.6bn of gross asset value could be pumped back into the market. Some 15 of the funds, with a combined AUM of €2.4bn, planning to terminate are scheduled to do so by the end of this year, six (total AUM of €1.4bn) in 2023, and the remaining 13 (total AUM of €5.7bn) in 2024. Most funds terminating in 2022 had a first close between 2011 and 2013, whereas those terminating in 2023 and 2024 belong to a slightly later vintage with a first close between 2014 and 2016. Over half of the funds (53%) set to terminate between 2022 and 2024 are core, while just under a third (32%) are value added in style. Most exhibit gearing levels of under 40% with only one fund (due for termination in 2022) leveraged at over 60%. The average performance returns of the terminating funds hit 6% in 2021, up from a low of -2.7% in 2020, reflecting the strong uptick in performance of European non-listed real estate last year. By number, over half (53%) of the funds scheduled to terminate in 2022 have a single country strategy, whereas the majority terminating in 2023 and 2024 (85% and 77% respectively) are multi-country focused. France is the dominant target for the single sector funds. Single sector strategy funds (19) dominate with a total €6.6bn of GAV. Nine out of 19 are retail sector funds, potentially bringing €2.9bn of retail assets to the market, followed by office sector funds (four out of 19), representing a possible €1.3bn. Iryna Pylypchuk, INREV’s director of research and market information, said: “Most funds are terminating as planned, with significantly fewer extensions than in the past. The latest data underpin the general picture of cautious stability within European non-listed real estate. There is also clear evidence of underlying market conditions affecting termination decisions, with investor liquidity requirements and current fund performance in focus.” By 2031, 90 funds are due to terminate, representing a GAV of €94.6bn – some 33% of the total INREV Vehicles Universe by number. To send feedback, e-mail samantha.mcclary@eg.co.uk or tweet @samanthamcclary or @EGPropertyNews