Opportunıty funds struggle to place capıtal

European non-listed real estate funds `struggled` to invest equity in 2007, with opportunity funds hit hardest.

A new survey released by INREV, the European Association for Investors in Non Listed Real Estate Vehicles, has found that private real estate funds had a low rate of investment last year.

According to the survey, such funds absorbed equity equivalent to 69 percent of the capital raised last year. This is a dramatic fall from 84 percent the year before. Opportunity funds invested a lower percentage still.
“The industry`s ability to invest capital appears to have fallen rapidly in 2007, which reflects the lower transaction volumes seen by the market in the second half of the year,” said research director Andrea Carpenter.
“Opportunity funds were particularly badly hit which may be explained by the low availability of debt slowing down their investment plans,” she added.
The findings are revealed in the Capital Raising Survey based on the responses of 85 funds and 15 funds of funds and published at INREV`s annual conference taking place this week in Istanbul.
Separately INREV says investment returns from European non-listed real estate funds fell in 2007 with a negative 3.9 percent total return compared to a positive 21 percent return in 2006.
The UK market was the poorest performer.
It was those funds that were winding down in 2007 that captured most of the yield compression that took place in the first half of the year. Funds with a vintage of 2006 performed worse.
INREV laid the blame for the drop in performance not just at the door of the credit crunch. It said the strengthening euro against the dollar was also a contributing factor.
Despite this, it is US investors who remain the most active investor group by nationality followed by the UK, the Netherlands, Germany and the Nordics.
Echoing some of the downbeat findings of the research, some 43 percent of attendees at the annual conference are pessimistic about the short term, according to a snap poll at the start of conference.