More than €20bn of real estate assets are expected to be released back into the market, over the next 10 years, as funds reach their end of life according to a report.
The latest Funds Termination Study 2018 published by real estate associations INREV shows that 92 European closed end non-listed real estate funds are set to terminate over the next decade.
Between 2018 and 2020, 44 funds with a combined assets under management of €9.6bn are due to close. The peak of activity is anticipated in 2022, when 22 funds could be wound up, the report said.
The study, which includes 248 closed-end vehicles managed by 91 managers, showed that funds with a retail strategy outnumber those in all other single sectors earmarked for termination between now and 2020, accounting for €5.0bn.
At a time when retail is facing multiple challenges, liquidation of these funds could add further pressure to the sector, it said.
Half of the single country funds scheduled for termination in 2019 target the UK. The looming Brexit deadline could, therefore, coincide with the release of around €337.8m, it said.
In total, the study revealed that €2.1bn of UK assets may be brought to the market over the coming three years.
Current market circumstances emerged as the most important reason for terminating funds – quoted by 65.2% of the study’s respondents, it said.
Prevailing market conditions are also seen as a key factor in the decision to extend a fund, the report said.
Liquidating was cited as the preferred termination option, though this varied according to style.
Core and opportunity funds opted for liquidation and extension in equal measure, whilst the majority of value-added funds went for liquidation.
Value added and opportunity funds were more likely than their core peers to consider options other than liquidation, extension and rollover, such as IPO or merger.
Lonneke Löwik, INREV’s CEO, said: ‘This study reveals intriguing insights, but context is always important. While it might be tempting to consider Brexit as a driver for fund terminations in the UK, seven years ago no-one could have predicted today’s political landscape; and there’s no reason why capital won’t return to the UK.
“The trend away from retail, however, may be longer lasting.”
