European non-listed real estate funds are increasingly planning to extend the life of their vehicles rather than liquidate as market conditions have become more challenging, a study by industry body INREV shows.
The results of the INREV Fund Termination Study 2008 show that 29% of funds due to terminate in 2008-2010 are planning to liquidate. This compares to 52% of funds in a similar study in 2007. At 59%, the majority of funds in the sample are choosing to continue the life of their fund. Of this 59%, 78% are planning to extend the fund and 22% are planning to roll-over the vehicle into a new structure.
"The results show that fund managers are considering the range of termination options to work towards the best exit for their funds. Currently, the flexibility of a one-to-two year extension is attractive from a timing standpoint as it delays the need to decide whether to sell assets into a market where capital values are falling. This is particularly the case for funds invested in the UK