INREV has published its Investment Intentions Survey 2005. The survey reports the investment intentions of INREVâs investor and fund manager members and focuses on investments in European non-listed real estate vehicles. It covers 22 investors who currently hold a total of â¬42bn of real estate, directly and indirectly, and 36 fund managers who have â¬175bn of European property assets under management.
The key findings are:
- Over the next two years, unlisted funds are likely to see substantial inflows of capital. Over 80% of investors said that they intend to raise their total commitment to real estate and 90% of them said they expect to increase their allocations to non-listed real estate.
- The principal reason for investing into non-listed real estate funds is diversification, followed by access to specific sectors. Predictably, managers view access to expert management as the key reason for investing via the unlisted sector.
- Key factors holding back investment in unlisted funds include: shortage of suitable product, fundsâ lack of transparency and inadequate market information on vehicles. Additionally, managers think limited liquidity is hampering further investment in the sector.
- Investors and managers agree that a fund management teamâs track record, its investment style and its target sector are the most important criteria in selecting funds.
- Value-added funds are the current vehicle of choice for both investors and managers. Investors prefer single-country, specialist, closed-end seeded funds with a small pool of investors. Managers also like funds to be specialist, closed-ended and seeded, but prefer multi-country vehicles to single-country ones and would rather see a large pool of investors.
- Retail is the most popular real estate sector, followed by offices and industrial. France, the UK and Central and Eastern Europe are the favored locations. Both investors and managers agree on this.
- A key issue for investors is corporate governance, where they feel there is significant room for improvement. The most important corporate governance tools are no-fault clauses, which mean
- investors can remove the fund manager under certain conditions, and personal co-investment by fund managers.
Commenting on the research findings, Judy Hill, INREV Chief Executive said: âThe results of this report underpin the initiatives INREV is currently progressing in terms of benchmarking and liquidity on behalf of the industry. With investors looking to significantly increase their weightings in non-listed property, it is essential that the industry responds by creating a market across Europe which is more transparent in terms of performance, better regulated and with improved and consistent mechanisms for creating secondary markets. Managementâs performance track record will always remain a key factor for the investor but these other factors will also have to become significantly more sophisticated to ensure that the industry evolves in such a way that it answers the requirements of future investors.â