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Foreign Exchange

Investment in Non-Listed Property Funds Grows

There has been a steady rise in the number of new non-listed property investment vehicles since the first one was launched in 2003, according to the European Association for Investors in Non-Listed Real Estate Vehicles (INREV).

In 2007, 14 non-listed property investment vehicles were launched, compared to four in 2004, six in 2005 and 10 in 2006. So far, one of these vehicles is scheduled to launch in 2008, according to INREV, which recently introduced a real estate funds directory that provides a comprehensive overview of the non-listed property vehicles investment world.

INREV's directory includes 36 funds with a total equity of roughly €10.9 billion. INREV estimates that this database covers 80 percent of the market in Europe and the majority of the Asian funds of funds, but that the number in the U.S could be significantly higher.

Of the €10.9 billion, around 68 percent or €7.4 billion is targeting Europe, while 17 percent or €1.8 billion is looking at Asia. Another four percent or €0.4 billion is allocated to invest in U.S. vehicles. The remainder is targeted at Australia or single country funds.

Some 29 of the funds in the directory are accessible to institutional investors only, while seven are available to both institutional and retail investors. Closed ended funds of funds make up 22 of the total and there are 14 open ended vehicles.

The office property sector is the most popular investment area and accounts for 36 percent of the directory by number of funds, followed by retail at 30 percent, industrial/logistics at 18 percent, residential at 9 percent and other real estate sectors at 7 percent.

The average target internal rate of return (IRR) is 12.1 percent, derived from the various investment styles of the underlying funds being invested in. Of the total target equity in funds of funds where managers indicated their investment strategies, €3 billion will target core vehicles, €5.3 billion value-added and €2.1 billion will look to invest in opportunity funds.

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