Assets of retail real estate mutual funds exceeded RUB 100 billion

Despite the fact that in the first quarter the inflow of funds to retail closed-end real estate mutual funds decreased, their assets grew by almost 14% and crossed the threshold of 100 billion rubles. Growth was driven primarily by funds investing in logistics centers and offices.

According to Kommersant’s estimate, based on the reports of real estate closed-end investment funds for unqualified investors, their assets increased by 12.7 billion rubles in the first quarter of 2023, to the mark of 104.5 billion rubles. This is almost half the growth in the previous quarter (plus RUB 23 billion), but almost four times the growth for the same period in 2022 (plus RUB 3.3 billion).

In the first quarter, not a single new fund was created, and the main increase in assets came from closed-end investment funds of the management companies Modern Real Estate Funds (MC SFN; 11.2 billion rubles) and Savings Plus (MC JV; 1.3 billion rubles .).

In the reporting period, there was a noticeable increase in investments of funds in real estate: if at the end of the year it accounted for less than 40% of all assets of such funds, then at the end of the quarter the figure increased to more than 42%.

Dmitry Reshetin, Commerce Manager of the Management Company of the Federal Financial Supervision Service, said that during the reporting period, two warehouse complexes in the Moscow region (Pushkino and Valishchevo), as well as a warehouse complex in Shushary near St. Petersburg, were purchased for funds for unqualified investors. The UK JV did not respond to Kommersant’s request.

Market participants expect a further decrease in the volume of cash in portfolios and an increase in investments in real estate. Dmitry Reshetin said that the company is actively looking at assets in the commercial real estate market. The most promising areas in the company are warehouse and logistics complexes, as well as data processing centers (DPC) in connection with the active digitalization of the economy and the refusal of Russian business from DPCs abroad.

Unlike the securities market, where transactions are made in real time, transactions with commercial real estate are extended in time, so market participants do not expect a sharp increase in investments in real estate.

Vladimir Stolnikov, Investment Director of the Trinfico Group, notes that real estate transactions historically do not go very quickly, the average period with good condition of documents lasts from three to six months. Prior to the purchase of objects in the fund, investors’ money is usually placed in money market instruments (one-day repo, short-term deposits) or in short government bonds. Ivan Velesevich, Director for Corporate Clients at Alfa Capital, notes that there are always risks that sellers of commercial real estate may change their minds about selling premises. In this case, the manager will have to look for another object, which will increase the time to exit the investment phase and may affect the profitability of the fund’s shareholders. “Therefore, the sooner ZPIF invests the shareholders’ funds in objects, the sooner it will reach the declared yield,” notes Ivan Velesevich.

In the context of the ongoing reduction of interest rates on deposits, interest in funds will continue, market participants believe. According to the data of the Bank of Russia for the second decade of May, the average maximum interest rate on ruble deposits at the top 10 credit institutions was 7.75% per annum. According to Marina Kharitonova, General Director of Accent Capital, the profitability of non-qualified closed-end mutual funds with a high-quality portfolio of commercial real estate can now bring the shareholder 7-10% per year. In addition, due to the generally accepted practice of annual indexation of lease agreements, it is possible to reassess the value of assets owned by the fund, which allows the shareholder to receive an additional premium when selling a share. “The premium, unlike long-term deposits, allows you to neutralize the impact of inflation and get additional profit when you exit the investment,” says Ms. Kharitonova. However, before investing in such funds, it is necessary to study their strategy, evaluate the quality of the fund’s asset portfolio and the experience of the management company in order to minimize the risks of negative portfolio revaluation, she concludes.

Vitaly Gaidaev