Harder for Europe's unlisted property fund cash to find a home

Posted On Friday, 25 April 2008 02:00 Published by
Rate this item
(0 votes)
Europe's half-a-trillion-dollar unlisted property funds industry is finding it increasingly difficult to invest the equity it raises due to higher debt costs, a key industry study recently showed

Property investment funds typically use additional debt funding to enhance the return on equity and meet their targets.

According to a survey by the European Association for Investors in Non-Listed Real Estate Vehicles, known as INREV, only 69 percent of the approximate 40 billion euros raised in 2007 was invested, compared with 84 percent and 90 percent in 2006 and 2005.

The figures are based on a sample of 41 funds that together raised 8.6 billion euros last year, representing just over a fifth of INREV's total database of funds which were open for investment last year.

"If you consider the second-half of 2007 when the credit crisis started to bite, prices started to look more attractive as yields rose," INREV's research director Andrea Carpenter said in a statement.

"But with the accompanying increase in market uncertainty and the rising cost of debt especially opportunity funds had difficulty to invest," she said.

In February, INREV said unlisted property fund gearing probably peaked at a record 54 percent of total assets last year.

INREV said a larger sample of 85 funds also showed that 68 percent of the funds which were likely to seek more equity this year -- about half of the total -- expected to raise more capital in 2008 than in 2007.

Georg Allendorf, managing director at Deutsche Bank-owned RREEF Spezial Invest and a member of INREV's management board said there were several reasons for the continued optimism, not least because some investors were still switching from physical property investments into indirect real estate investments.

He also said European pension funds still wanted to raise their allocation to real estate, which had a solid track record as a hedge against inflationat a time when inflationary expectations were rising.

INREV said unlisted European funds generated a negative return of 3.9 percent in 2007, compared with a 21 percent gain in 2006. It blamed the strength of the euro as well as a poor performance by UK-focused funds.

Publisher: Thomson Reuters
Source: reuters.com

Most Popular

Prevance Capital launches the Executive Premier Funding Solution, targeted at experienced, successful property developers and businesses in South Africa

Sep 14, 2021
Are you tired of waiting for lengthy traditional funding methods to be approved? Prevance…

Attacq sees success with high-rise development The Mix

Sep 22, 2021
Waterfall’s latest high-rise residential development, The Mix Waterfall, is approaching…

Multinational companies moving into Nairobi’s new Garden City Business Park

Aug 31, 2021
Garden City Business Park in Nairobi Kenya
With its modern, flexible workspaces and landscaped courtyard areas, the newly completed,…

SAIV offers advice to property owners affected by the July 2021 unrest: You may be eligible for legislated economic relief

Sep 10, 2021
The civil unrest seen in KwaZulu-Natal and parts of Gauteng in July had a devastating…

Another record sale in Johannesburg CBD

Sep 01, 2021
Johannesburg CBD -3
Aucor Property has once again set a record with the sale of 4 mixed-use, multi tenanted…

Please publish modules in offcanvas position.