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Funds coming to the end of their life could provide a surge in UK and retail assets put up for sale over the next couple of years, according to a new report. But the deals may come as the value of assets is likely to be falling.
INREV, the body which represents nonlisted real estate funds, said in its most recent Funds Termination Study that 50 funds in Europe with assets under management totalling €13.2B (£11.7B) are set to terminate between now and the end of 2021. Most will sell assets because of current market conditions and because they have to stick to their original manifestoes, INREV said.
About half of the funds terminating invest in one country alone, and in the majority of cases that country is the UK, INREV said, indicating that €5B (£4.4B) of UK assets could be coming up for sale as the UK is negotiating a new relationship with the European Union.
INREV also pointed out that €4.4B (£3.9B) of retail assets could come to the market at a time when retail values are in flux due to changes in the nature of consumer shopping habits. It did not specify which European countries those retail assets are in, and there is likely to be some crossover of UK and retail assets coming up for sale.
INREV said those funds terminating in 2021 have the best returns, an average of 5.6%.
“There are no shocks, but the volume of retail assets expected to be offloaded is surprising,” INREV Chief Executive Lonneke Löwik said. “The study results also raise an interesting general question about how managers will deal with the challenges of bringing assets to market at a time when pricing looks set to come under increasing downward pressure.”
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