Inrev, the European Association for Investors in Non-Listed Real Estate Vehicles, has released data suggesting that private debt funds have grown to 98 in the past seven years, leading its director of research to say, ‘In theory there is plenty to be enthusiastic about. However, the test is to see whether the segment will continue to sustain investor appetite.’
Iryna Pylypchuk said: ‘The expansion of the European non-listed real estate debt market is providing a more diverse choice of funding and healthy competition to traditional lenders.’
‘Confirming this growth, we are now starting to see the first signs of regulatory involvement. The European real estate market is under huge pressure to decarbonise, and traditional lenders are broadly on the sidelines when it comes to retrofit lending.’
‘So, the biggest question is to what extent will the non-traditional lenders fill a funding gap, especially when it comes to an ESG-focused debt proposition.’
Over the last 3 years, 10 newly-launched vehicles have been added to the market. with combined target equity of €6.78 bn or 11.2% of the overall universe.
Their characteristics mirror the overall trends. Eight of the 10 vehicles follow a multi country, multi sector strategy and the remaining two are single country, multi sector funds with a focus on the UK.
Only one of the newly launched funds is an open-end structure. Inrev said: ‘It is worth noting that, at €680 mln, their average vehicle size by target equity is larger than that of the overall universe average of €650 mln.’
Senior debt funds make up the largest share of the Universe, accounting for 54 of the 98 vehicles and €38.8 billion of the total target equity.
In terms of loan generation, relatively few vehicles target a pure loan acquisition strategy. Combined, mixed loan generation strategies and direct lending dominate with 83 vehicles and €54.3 billion in target equity, representing 84.7% and 90.0% of the respective totals.
Multi country vehicles account for 70.1% of target equity and dominate new fund launches.
