Thu, Oct 28, 2021
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Industry Updates

Capital raised for European non-listed real estate debt hits highest level since 2015

Wednesday, October 13, 2021
Opalesque Industry Update - 2020 recorded the highest share of capital raised for European non- listed real estate debt products since 2015, a sharp increase to 19% from just 5% in 2019.

Traditional equity real estate players are stepping in to fill the funding gap in the market in search of yield, and are attracted by diversification benefits that non-listed real estate debt has to offer.

European investors in particular are expected to continue allocating to the asset class. The ANREV / INREV / PREA Investment Intentions Survey 2021 highlights that 21.9% of European investors plan to increase allocations to European non-listed debt products over the next two years (up from 16.3% in 2020). Similarly, 28.1% expect to maintain their current allocations and none indicate an intention to decrease their allocations over this period. This contrasts with the Asia Pacific and North American investors, who indicated slowing expectations to increase allocation towards European debt from 30.0% and 20.0% respectively in 2019, to 18.2% and 12.5% in 2020. This is a trend pronounced amongst those with cross-regional allocation strategy, possibly driven by uncertainties surrounding the COVID-19 pandemic.

For pension funds and insurance companies debt accounted for 32% and 17% of their overall European non-listed capital raising activity in 2020, respectively. As pension funds and insurance companies both adopt a liability-driven investment strategy, non-listed real estate debt products likely offer an attractive risk-adjusted investment opportunity.

Expansion of debt universe

The 2021 INREV Debt Vehicles Universe Study expanded to include 95 vehicles, with a total target equity of €57.8 billion, doubling in size since 2016.

The latest study includes 21 newly added vehicles, of which ten were launched in the last three years, for the most part with a closed end investment structure and a senior debt loan strategy. This is in line with the overall composite of the Universe. In general, the average size of younger vehicles is slightly larger compared to their older peers, with €680 million and €610 million target equity, respectively.

Open-end vehicles with younger vintages are slightly smaller on average compared to their older peers, whilst the opposite is true for the recently launched closed-end funds. The size difference is most marked when looking at a country and sector strategy. The average target equity of a newer single-country, multi-sector vehicle is €930 million - more than twice the size of an equivalent older vehicle at €430 million.

Preferred strategies

The Debt Vehicles Universe Study 2021 reveals a substantial preference for senior debt loan strategies, which account for 55.8% of all debt vehicles by number and 65.6% by target equity.

It is the most popular strategy in both closed and open-end debt vehicles, accounting for €32.5 billion and €5.3 billion of target equity, respectively. In contrast, the riskier junior and mezzanine debt strategies represent only 17 vehicles in the total universe of 95, or 12.5% in terms of target equity.

Direct lending and mixed loan generation strategies dominate the composition of debt vehicles in the Universe, with 80 vehicles being equally split between the two. Direct lending vehicles show a total target equity of €17.8 billion, almost half of the mixed loan category. Just six vehicles have a loan acquisition strategy with a combined target equity of €4.2 billion.

In terms of geographic strategy, debt vehicles with a multi-country investment strategy account for 53.7% of the Universe by number and 72% by size, with a total target equity of €41.7billion. Vehicles with a single-country strategy account for the remaining €16.2 billion of target equity.

In terms of target equity, multi-sector strategies account for 96.5% of debt vehicles included in the study, marking a significant increase of circa 20% in absolute terms on the previous study. This echoes the strong preference for multi-sector strategies across all non-listed real estate investment routes, with private real estate debt being no exception.

Iryna Pylypchuk, INREV's Director of Research and Market Information, said: "The doubling in size, be it in terms of fund managers' debt AUM or the INREV Debt Universe, suggests that the European non- listed real estate debt market is finally taking off. There are many moving parts in terms of how non- traditional lenders develop their strategies and product offerings in this space, but over the coming years we expect European investors to continue increasing allocations to non-listed real estate debt, fuelling strong capital raising activity and bringing much-needed transparency and improved market coverage."

What do you think?

   Use "anonymous" as my name    |   Alert me via email on new comments   |   
Today's Exclusives Today's Other Voices More Exclusives
Previous Opalesque Exclusives                                  
More Other Voices
Previous Other Voices                                               
Access Alternative Market Briefing


  • Top Forwarded
  • Top Tracked
  • Top Searched
  1. SPACs: Is the SPAC boom fizzling out?, SPAC merger mania: Companies that went public via blank-check merger in Q3, SPAC marketing heavily curtailed in House Democrats' draft bill[more]

    Is the SPAC boom fizzling out? From Crunch Base: SPACs may be fizzling out. Since February 2021, when the SPAC (special-purpose acquisition company) craze was booming, a market selloff has wiped out about $75 billion of the value of companies that went public using SPACs, according to

  2. Institutional Investors: Vanderbilt University endowment records 57.1% return for fiscal year, MIT endowment logs 55.5% return for latest fiscal year, AP1 re-tenders $720m emerging markets small-cap mandate, Harvard, world's wealthiest university, sees endowment soar to $53.2bn, San Francisco shifts passive equity mandate to active BlackRock ESG strategy[more]

    Vanderbilt University endowment records 57.1% return for fiscal year From Vanderbilt University's endowment returned a net 57.1% in the fiscal year ended June 30, according to a financial report on the Nashville, Tenn.-based university. The report did not provide benchma

  3. New Launches: Massar Capital launches new global discretionary strategy, White Oak closes latest direct lending fund at $1.3bn, Aterian replicates speedy fundraise to collect $830m in nine weeks, Sofinnova holds $548m final close for Capital X, Multicoin Capital targets $250m for third crypto VC fund, Tobam launches French bitcoin and blockchain fund[more]

    Massar Capital launches new global discretionary strategy Massar Capital Management has launched a new discretionary macro hedge fund strategy which aims to capitalize on directional trading opportunities across a broad set of global markets. The Massar Macro Directional is the N

  4. How Viking Global became the hedge-fund industry's hottest launch pad[more]

    From Business Insider: Since Dan Sundheim's massively successful launch of D1 Capital in 2018, there have been six more spinoffs from Viking Global that have collectively raised billions - and at least one more is in the works. Among them: Grant Wonders, 31, who launched Voyager Global this ye

  5. PE/VC: Moody's warns of 'systemic risks' in private credit industry, Sequoia to restructure itself away from traditional VC model, Modeling private equity market beta, VC investors pour money into Chinese start-ups despite regulatory crackdown[more]

    Moody's warns of 'systemic risks' in private credit industry From FT: The burgeoning private credit industry of lending to buyout groups has grown to about $1tn, but opacity, eroding standards and the difficulty in trading these slices of debt pose "systemic risks", according to rating