Spoiled milk? What to do when funds expire

October 29, 2014 admin

Milk splashThe heady days of fundraising prior to the global financial crisis saw about $91 billion in capital raised by 184 real estate funds in the Asia Pacific region, with 91 percent of these offerings in closed-end funds, roughly 84 percent of which are likely to expire between 2013 and 2016, according to CBRE Global Research and Consulting’s October report, The Great Wave of Fund Expiration: What Are the Options Besides Termination?

With fund expirations expected to peak during 2015–2016, CBRE expects the Asia Pacific market will only be able to absorb about 75 percent of created market liquidity from asset dispositions during this timeframe.

To secure returns, the critical nature of this reduced market absorption suggests fund managers will need to carefully consider fund positioning and possible options beyond fund termination, such as fund extension, secondary trading, IPOs and restructuring, notes the report.

GPs with vintage-year funds that are letting their LPs know about the options being considered are less likely to potentially spoil the relationship.

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Jennifer-Molloy91x119Jennifer Molloy is editor of The Institutional Real Estate Letter – Asia Pacific

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