Fund managers are opting to extend the lives of their European non-listed property funds rather than sell assets into a falling market, a survey by the European Association for Investors in Non-listed Real Estate Vehicles (INREV) has shown.
Of the funds due to terminate between 2008 and 2010, 29% are planning to liquidate compared with 52% in 2007, INREV’s Fund Termination study for 2008 said.
In comparison, 59% of fund managers are planning to continue the life of their funds.
Of the 50%, 78% are planning to extend the fund and 22% are planning to roll-over the vehicle into a new structure.
‘The results show that fund managers are considering a range of termination options to work towards the best exit for their funds,’ said INREV research director Andrea Carpenter at the EXPO Real property event in Munich.
‘Currently, the flexibility of a one-to-two year extension is attractive from a timing standpoint as it delays the need to decide whether to sell assets into a market where capital values are falling.
‘This is particularly the case for funds invested in the UK – where the credit crunch has hit hardest so far, and where nearly half the funds surveyed are investing.’
The report, which surveyed 25 fund managers, said that 43% of opportunity funds were opting to continue the fund– an unusual step as opportunity funds tend to liquidate as planned – in order to avoid selling into a falling market.
Core funds are most likely to continue with 58% planning to either extend or roll-over and 25% planning to liquidate.