There can’t be many European real estate fund managers looking forward to what the new financial year will bring. Even the most optimistic analysts do not foresee a bottoming out of capital values until the third quarter of 2009 and predict no tangible signs of recovery until well into 2010. In the meantime, fund managers will have to juggle further depreciation of their portfolios, exacerbated by an expected increase in distress sales, with the expectations of their current and prospective investors. And they will have to do it all the while fretting over the loan-to-value agreements with their banking lenders as plunging capital valuations threaten covenant breaches.
There is the very real prospect that smaller funds with fewer assets may be forced to merge in order to shore up their finances and maintain investor confidence, while analysts anticipate few new vehicles or fund managers entering the market in 2009. That is in shar