EUROPE - Real estate investors are beginning to consider liquidation as a fund exit strategy for the first time since 2007, according to the European Association for Investors in Non-listed Real Estate Vehicles (INREV).
The 2010 INREV Fund Termination Study showed most investors continued to favour extending the life of funds, as they have over the past two years, in a bid to avoid selling assets when they might sell for more in the future.
But the organisation noted a marked increase in the likelihood of fund termination, reflecting a change in market outlook among investors.
The study focused on closed-end real estate funds in the INREV vehicles database that were due to terminate between 2010 and 2012.
Lonneke Löwik, director of research and market information at INREV, said: "Investors have markedly changed their approach to liquidation, looking to review their options earlier in the lifecycle of the fund and expecting fund managers to prepare highly detailed plans for the disposing of assets.
"They remain cautious and are yet to be convinced the near future is the best time to realise value."
Funds investing in the UK are currently more likely to be liquidated than those in continental Europe, reflecting the more advanced recovery in the UK market.
Survey respondents said they anticipated the European market would continue to improve, meaning capital values were expected to increase and loan-to-value ratios to decrease, helping to solve debt issues faced by funds.
Debt and refinancing issues continued to be rated important in funds due to terminate in 2010, but declined overall in importance compared with the 2009 study.
Market turbulence in recent years had led to earlier discussions about fund terminations, rather than actual decisions to terminate, with a view to achieving the best possible continuity plans for all parties involved.
INREV said this had further highlighted the importance of having a group of like-minded investors with similar investment horizons within a fund.
Information for the study was collected from 39 funds - across 23 fund management houses representing €24.6bn of assets under management - between May and June.
