SEB Investment now pure real estate, examining closed-end funds

SEB Investment, the German investment division of parent Swedish bank SEB, said earlier this month that it plans in future to focus solely on real estate, and said it is looking at making its first venture into closed-end funds. The company is one of several German former managers of open-ended property funds that are now in the process of being wound up due to liquidity problems in the fallout from the financial crisis.

Despite being committed to selling off its assets from its ImmoInvest fund, the company said the environment is now actually conducive to generating new institutional business. In particular, demand for core properties has actually played into the company’s hands, it says, as it can provide top-quality assets for hungry buyers.

This is a much more preferable situation than 2-3 years ago, when there was little demand, said Christian Hanke, the head of institutional real estate clients at SEB Investment. Among other plans, his group was now looking to sell off assets from formerly open-ended funds in "themed packages” – such as ‘European core’, ‘US retail’ or ‘European logistics’ – and other assets to investors, possibly in club deals.

Another area SEB Investment is looking at is the closed-end fund business, which has been restructured in Germany through new KAGB regulations. SEB Investment confirmed that it had specifically included the possibility of entering the segment when applying recently for a KVG license, an obligatory step in the application to German regulator BaFin as part of the new regulations, by which the country implemented the Alternative Investment Fund Managers Directive (AIFMD).

Meanwhile, the Berlin-based Scope rating agency reported that the amount of new closed-end funds in all asset classes set up in Gemany last year was €1.5bn, only half of the amount raised in the sector in 2012. Across all categories, the hardest hit was renewable energy, while the only class of funds not down on the previous year were leasing funds, particularly aviation.

As in the previous year, real estate funds made up 65% of all closed-end funds. Their biggest difficulty was in finding suitable property assets in which to invest against stiff competition, a situation made more difficult by the introduction of the new KAGB legislation in July, which effectively paralysed the industry through the second half of the year. Scope expects fund emission to pick up again in 2014 as initiators adapt to the new rules of the AIFs (Alternative Investment Fonds), with numerous fund initiators ready to launch new products.