Over €20b of real estate assets set to hit the market by 2028

Approximately 92 European closed-end, non-listed real estate funds are set to terminate over the next 10 years, releasing a potential €20.9 billion ($24.3 billion) of assets back into the market, according to the INREV Funds Termination Study 2018.

Between 2018 and 2020, 44 funds with a combined assets under management of €9.6 billion ($11.2 billion) are due to close. The peak of activity is anticipated in 2022, when 22 funds could be wound up.

Funds with a retail strategy outnumber those in all other single sectors earmarked for termination between now and 2020, accounting for €5 billion ($6 million). At a time when retail is facing multiple challenges, liquidation of these funds could add further pressure to the sector.

Half of the single-country funds scheduled for termination in 2019 target the United Kingdom. The looming Brexit deadline could therefore coincide with the release of around €337.8 million ($392 million). In total, €2.1 billion ($2.44 billion) of U.K. 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 percent of the study’s respondents. Prevailing market conditions are also seen as a key factor in the decision to extend a fund.

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.

“This study reveals intriguing insights, but context is always important,” says Lonneke Löwik, INREV’s CEO. “While it might be tempting to consider Brexit as a driver for fund terminations in the United Kingdom, seven years ago no one could have predicted today’s political landscape; and there’s no reason why capital won’t return to the United Kingdom. The trend away from retail, however, may be longer lasting.”