* Funds raised in 2006, 2007 seen most vulnerable
* Capital raising planned in '09 down 59 percent from '08
* UK offices seen most popular buy for property funds
By Daryl Loo and George Georgiopoulos
LONDON/ATHENS, April 23 (Reuters) - Investors are highly concerned about potential debt problems in unlisted European real estate funds, causing them to drastically cut back equity commitments to the sector, an industry body said on Thursday.
In a survey of investors, 88 percent said they were either "very concerned" or "concerned" about property funds breaching covenants, INREV (the European Association for Investors in Non-listed Real Estate Vehicles) said in an industry conference held in Greece.
"Investors have identified that the vintages of funds that are likely to cause most concern are from 2006 and 2007," said Russell Chaplin, co-chair of INREV's Research Committee and Global Strategist for UBS Asset Management.
"(That was) when peak levels of capital flowed to non-listed real estate vehicles and when the propensity to use debt was high," said Chaplin.
The debt worries have hit the capital raising efforts of property funds this year, as one-third of investors and half of fund of funds managers who had been asked to commit fresh equity had rejected the request, INREV said.
Property fund managers surveyed said they plan to raise 6.1 billion euros ($7.95 billion) in 2009, down 59 percent from the amount targeted in 2008.
The most popular target for property investments this year are offices in the UK, where fund managers intend to allocate 8 percent of their capital as they eye the upswing following a steep fall in prices, said INREV.
British commercial real estate has seen the sharpest correction among markets so far in the current downturn, losing over 40 percent of their value since the peak in mid-2007.
(See www.reutersrealestate.com for the global service for real estate professionals from Reuters)
($1=.7678 Euro)
(Editing by Simon Jessop)