34 funds expect to terminate between 2022 and 2024
Liquidation replaces extension as preferred termination option
30 August 2022, Amsterdam – According to the INREV Funds Termination Study 2022, 34 European closed end, non-listed real estate funds will terminate between 2022 and 2024. As a result, €9.61 billion of gross asset value (GAV) could be pumped back into the market. This compares with just over €10 billion identified for 2021 to 2023, in last year’s study. By 2031, 90 funds are due to terminate, representing a GAV of €94.6 billion and equating to 33% of the total INREV Vehicles Universe by number.
The majority of the funds, (15) with a total AUM of €2.4 billion planning to terminate are scheduled to do so by the end of this year, 6 (total AUM of €1.41 billion) in 2023, and the remaining 13 (total AUM of €5.74 billion) in 2024.
Vintage, style, and leverage
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. Clearly, most funds earmarked for termination over the coming three-year period were launched in the upswing of recovery from the global financial crisis.
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. Unsurprisingly, most exhibit gearing levels of under 40% with only one fund (due for termination in 2022) leveraged at over 60%.
Performance, country, and sector
The average performance returns of the terminating funds hit 6.0% 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 €6.65 billion of GAV. Nine out of 19 are retail sector funds, potentially bringing €2.94 billion of retail assets to the market, followed by office sector funds (four out of 19), representing a possible €1.26 billion.
Key drivers and termination strategies
According to this year’s accompanying Funds Termination Survey, 86% of the 21 respondents selected the ‘No issue, termination as planned’ option as the key driver for termination.
There has been a shift in preferences relating to termination strategies. Half of respondents now opted for ‘Liquidation’ as their preferred form of fund termination, with a third selecting ‘Extension’ – reversing last year’s order of preference.
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.’
– Ends –
For further information, please contact:
Johlyn da Prato, johlyn.da.prato@inrev.org | +31(0) 621397456
Justin St Clair-Charles, inrevteam@firstlightgroup.io | +44 (0) 7769 644 059
Josie Workman, inrevteam@firstlightgroup.io | +44 (0) 7460 325 392
Notes to Editors
About the Funds Termination Study 2022
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.
This year’s study includes 271 closed end vehicles managed by 92 managers from the INREV Vehicles Universe. Collectively these vehicles represent a total Gross Asset Value (GAV) of at least €94.6 billion. Of these 271 vehicles, 90 funds are due to terminate in the coming decade (2022 to 2031). This group represents a total GAV of at least €36.5 billion. The study was launched in 2007 and is published once a year.
About INREV
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 495 members which include 120 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.