Nearly 90 percent of investors in non-listed real estate funds are concerned that the funds they have invested in are likely to breach their loan covenants, according to the latest research by INREV, the European Association for investors in non-listed real estate funds.
In its INREV Debt Study, the representative body found that 88 percent of investors and 85 percent of fund of funds managers had expressed “high levels” of concern over “potential breaches” in the vehicles they have invested in.
The investors polled were most concerned about debt issues for non-listed real estate funds launched in 2006 and 2007.
INREV found that more fund of funds managers were concerned about breaches than investors. “This may be explained by more funds of funds adopting higher risk and return strategies, which have the potential to be more susceptible to breaching terms,” INREV said in an announcement.
INREV added that fund managers it had questioned said that they had identified the issues and that they were “tackling” them.
INREV also said that this view was backed up by bank managers who said that, generally, they were pleased with fund managers’ efforts in resolving potential breach situations.
However, banks did express concern that fund managers should report issues sooner than they are currently doing so.