A record €32 billion was raised for global real estate debt vehicles globally in 2019 according to INREV, the European Association for Investors in Non-Listed Real Estate Vehicles.
According to the INREV Debt Vehicles Universe 2020 study this reflected a strong uptick in demand for non-listed real estate debt and was an increase of about 50% on the 2018 results. INREV also said that the figure is significantly higher than in any year since INREV records began in 2013.
According to the global Investment Intentions Survey 2020, investors in North America and Asia pacific have a strong preference for non-listed real estate debt strategies. In Europe, where the private debt market is still immature, it is not yet in the top three preferred strategies for investors in this region, but is growing strongly.
INREV said debt vehicles posted strong performance expectations in 2019, with the average target IRR for all vehicles at 7.7%. Vehicles with a senior loan strategy targeted an average IRR of 6.8%, while those adopting riskier, subordinated loan strategies recorded a target IRR of 10.3%.
Vehicles with a mixed loan generation strategy numbered 33 of the total of 80, with a combined target equity of €31 billion. However 32 vehicles adopted a direct lending strategy, with a combined target equity of €11.8 billion. These tend to be significantly smaller in size, INREV said, with an average target equity of around €370 million.
Senior debt predominates
The study also revealed the predominance of vehicles focused on a senior debt strategy. These accounted for 51.3% of the total universe and a total target equity of €30 billion. By contrast, subordinated strategies (such as mezzanine and junior debt) made up less than 20% of the total, either by number, target equity or target GAV.
Debt vehicles with a pan- European strategy occupied a pre-eminent position, accounting for €26 billion (74%) of the total target equity. Single country , Western European debt vehicles were the second largest group accounting for €8.3 billion.
“These data point to a general uptick in investor interest in real estate debt vehicles latterly, and judging from the latest announcements capital raising activity for debt strategies continues strongly,” said Iryna Pylypchuk, INREV’s director of research and market information.