Real estate debt funds only halfway to targets

Real estate2At least 19 European real estate debt funds have launched in the past three years but they are only halfway to their combined target size of between €9-10 billion.

The opportunity for these funds follows the withdrawal of banks from real estate lending, says Inrev, the European Association for Investors in Non-Listed Real Estate Vehicles.

One hurdle to fuller adoption, though, is that many managers lack a track record to satisfy big investors. Another barrier has been the lack of senior lenders, which has meant managers have struggled to succeed with mezzanine strategies.

Real estate debt funds that are now being launched tend to adopt a mix of strategies, including senior, whole loans and broader subordinated strategies, says Inrev. Most debt funds are conservative in that they focus on newly originated loans on high-quality properties in markets such as the UK, Germany, the Nordics, Netherlands and France.

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