Non-listed real estate fund returns fall sharply in 2007

Investment returns from European non-listed real estate funds fell to -3.9% in 2007 compared with 21% in 2006. The dramatic decline is due to the euro increasing in strength against the dollar and sterling as well as a poor performance from the UK market for non-listed real estate funds, said Lisette van Doorn, chief executive of the Inrev association of non-listed European real estate funds.

Spreaking at Inrev's fifth annual conference currently being held in Istanbul, Van Doorn said the news was not all bad. 'What these results mask is the fact that Continental Europe still turned in a strong performance at 12.5% in 2007 as shown in our new Europe Ex-UK sub index. This is still down on the 16.1% from 2006 but demonstrates that the impact of the credit crunch is varying greatly across the European markets with the UK taking the greatest hit so far.'

Van Doorn pointed out that the overall index figures show that the majority of Continental European funds have performed far better than vehicles in the UK. 'There was nevertheless an increase in yields, but the underlying market was not as affected by the credit crunch as the UK,' said Micharl Morgenroth, board member of Germany's Gothaer Sset Management.

At a single country level, Finland, France and the Netherlands delivered the highest total returns in 2007 at 15,5%, 12.9% and 12.8% respectively. At the property segment level, residential and offcices outperformed retail and industrial/logistics with returns of 8.8% and 4.4% respectively. For the first time, Inrev also included analysis of investment style returns in a sub-index of the 2007 index release. Core vehicles produced a total return of -4.7% last year, value-added funds returned -3.1% and opportunistic vehicles 20.1%.

Inrev's 2007 index covers 257vehicles with a total net asset value of EUR162.3 bn.