- September 1, 2009: Vol. 3, Number 9

To read this full article you need to be subscribed to Institutional Real Estate Europe

Here and Now

by Deborah Lloyd

One-fifth of real estate funds face refinancing in the next 12 months. Many funds are already struggling with breaches of their loan-to-value (LTV) covenants. In 2010, it is predicted that income cover ratio (ICR) breaches will start to occur, brought about by tenant defaults, reduced rents and higher vacancy rates. What is certain is that funds will find it very difficult to arrange new financing and, even if successful, will encounter higher debt costs.

While debt has triggered the current problems that funds are encountering, it is not just the breaches of LTV covenants that have caused this. There are other underlying issues:

•      Sales are restricted due to falling prices.

•      Open-end funds are suffering from attempts by investors to exit.

•      Investors are threatening to default on undrawn commitments.

These issues have driven fund managers to look at restructuring not just

Glossary, videos, podcasts, research in the Resource Center

Forgot your username or password?

Close your account?

Your account will be closed and all data will be permanently deleted and cannot be recovered. Are you sure?

We respect your privacy! Please give consent for processing data as described in our Privacy Policy