Study: investors turning to non-listed Asian property funds

Real estate investors are increasingly planning to raise their exposure to non-listed Asian real estate funds over the next two years, according to a survey released Tuesday by INREV, the European Association for Investors in Non-Listed Real Estate Vehicles, and AREA, the Asian Real Estate Association.

The survey is the first major pilot survey jointly conducted by INREV and AREA, which decided to link up last month for selected projects. In April PERE first reported that INREV reached a decision at the MIPIM conference that it would start looking at Asian non-listed funds, with INREV's chief executive Lisette van Doorn saying the association's Members Survey last year received strong support for expanding coverage internationally.

The results from the survey showed that respondents felt that the credit crunch was also impacting on the Asian real estate market, through more limited availability of debt and the potential re-pricing of real estate assets, according to INREV. However, across the board, the effects of the credit crunch are expected to be less in the region than in Europe or the US, and the financial crisis might even turn out to be positive for Asia, as some respondents thought that this could mean more capital would be directed towards Asian real estate, which was originally allocated to the other markets.

This INREV/AREA Investment Intentions Asia Survey was based on 65 responses including 30 fund managers, 21 institutional investors and 14 fund of funds managers. Some 50 percent of respondents were INREV members and 26 percent were AREA members. Most respondents’ headquarters are based in Europe (71 percent), with an additional 17 percent based in the US and 12 percent in Asia.

“The investors that responded to the survey are clearly focused on nonlisted funds, considering that these account for 85% of their holdings in Asia, with access to expert management being the main reason for investing in these funds,” Lisette van Doorn said. “However, at the same time lack of transparency and current market conditions are hampering investment in Asian non-listed real estate funds.”

“In terms of investment styles, the results turned out to be quite surprising, as far as investors were concerned,” said Nick Loup, co-director of AREA and Managing Director of Grosvenor Asia Pacific.”. “Investors indicated a considerable preference for core funds (40 percent), with the remainder split evenly between value-added and opportunity fund styles. Anecdotal market evidence seems to indicate that investors are generally more focused on value-added and opportunity funds, which is supported by the general character of Asia as a region of emerging markets.”