The great disposal drive by the 14 German open-ended property funds currently in liquidation continues apace, with Netherlands and Germany itself bearing the brunt of sales this year, according to property services group DTZ. The funds need to sell off €21bn of assets by 2017, the final date for most of the funds to be wound up and proceeds paid out to shareholders.
About €18bn of the remaining assets, with a total of 6.5 million sqm, are located in Europe, of which a third are in Germany (33%), 19% in Benelux, and 17% in southern Europe. Magali Marton, head of research for CEMEA at DTZ, said in a report that Germany was in a good position to absorb the sales, but the Benelux countries, which have seen much less investment activity over the past 18 months, may well be negatively affected by the overhang.
Three German funds in particular - Degi Europa, HansaImmobilia and Morgan Stanley P2 Value Fund – could be obliged to offload assets worth as much as €1.4bn in the Netherlands this year, which could destabilise pricing in that market, the report says. With the Netherlands only seeing investment volumes of €3bn in total last year, well below its €5.7bn annual average, other funds obliged to liquidate have been holding back in the hope of getting better prices later.
Last year, German funds in liquidation or closed for redemptions sold €3.4bn in 27 deals across Europe. Of these, 41% of sales took place in France, followed by 31% in the UK, where the funds profited from favourable market conditions and attractive pricing. But domestic sales only accounted for 20% of deals despite buoyant property market conditions in Germany. The value of closed or liquidating GOEFs fell to €21bn from €25.8bn globally.
SEB ImmoInvest and CS EuroReal saw the largest decreases, down to €1.7bn and €1.1bn respectively. Each have remaining assets worth €4.5bn, and are scheduled to close in 2017. Funds with an end-date in 2013 still hold €1.7bn of assets under management and are expected to step up activities in Europe, especially Germany and the Netherlands. “The peak of the liquidation process will be reached in 2014 with the shutdown of three funds, including AXA Immoselect (with €2bn remaining assets under management) and Degi International (€1.3bn),” said Marton. “In 2017 we will also see the expiration of mandates for the two biggest GOEFs in liquidation, SEB ImmoInvest and CS EuroReal.”
The German open-ended funds industry is still struggling to get back on its feet and regain investor confidence after the introduction of new legislation last year designed to - nominally – protect private investors. Since then a handful of the strongest fund organisations – such as Union Investment, Deka Immobilien, CommerzReal and Deutsche Bank’s RREEF – have strengthened their position, but 14 other funds were forced by liquidity pressures to close themselves down.