EUROPE - Many institutional investors are concerned that their non-listed real estate funds may breach loan-to-value (LTV) covenants, but they are often reluctant to inject fresh equity into vehicles, according to an INREV survey.

The study found that the majority of fund-of-funds (FoF) managers (53%) questioned were "very concerned" while 88% were at least "concerned" about covenants being breached, particularly among funds launched in 2006 and 2007.

Yet one-third of investors and half of FoF managers who had been asked to commit fresh equity had turned down the request, INREV revealed.

Approximately one-fifth of investors said they had committed new equity to existing funds, while only 13% of FoF managers fulfilled a similar request, although it should be noted that the latter have to seek underlying investor approval.

"Investors want to ensure they have a good understanding of what the money will be used for and in these market conditions such a decision cannot be made lightly," explained Lisette van Doorn, chief executive of INREV.

That said, the survey showed that investors were positive on the availability of debt in the market and 72% reported debt as being available, albeit more expensive.

The survey results were launched at last week's INREV annual conference in Athens, during which delegates heard from Peter Denton, managing director at West Immo, who estimated there was €40-50bn of debt financing available for European real estate investments.

"The level of liquidity in the market today, historically, is awful," he said. "But, relative to the needs of today, it is actually pretty good."

However, Russell Chaplin, co-chair of the INREV research committee and global strategist for UBS Asset Management, suggested that many investors had lower appetite for gearing levels going forward; a point that was echoed on a number of occasions during the conference.

Andrew Smith, chief investment officer at Aberdeen Property Investors, stressed the challenge for funds was to find the right point in time to introduce leverage again.

Smith argued that funds would eventually need to leverage their investments - at appropriate levels - to take advantage of a market recovery and to recover their losses.