KanAm study shows how fast open-ended funds are liquidating
The Frankfurt-headquartered real estate fund manager KanAm Grund REAM has just published the third annual edition of its open-ended funds study, entitled "Liquidation of open-end real estate funds from the point of view of the investor", and it makes for gripping reading for those of us who follow the sector closely.
The study covers the past four and a half years, since when ten German real estate companies terminated a total of 18 open-ended real estate funds with a property value of €33bn, or more than a third of the entire amount held in open-ended funds at the time. It describes the collapse of confidence in the open-ended vehicle with its availability of daily trading until the government introduced new legislation governing the sector in July 2013.
Meanwhile, the funds affected have been busily selling off their assets, generally facing a 3-5 year notice period, before clearing off their outstanding bank loans and paying out capital at regular intervals to their investors. The process is expected to be over for all liquidating funds by May 2017 at the latest.
The study shows that of the original €33bn in liquidation, the 18 funds have collectively sold about €19bn of their assets, or 355 individual properties, and have paid out €11.6bn to their erstwhile investors.
Leading the field is KanAm itself which has realised €3.9bn. The largest amounts still outstanding are concentrated on three funds – SEB Immoinvest (4.3bn), CS Euroreal from Credit Suisse (€2.3bn) and KanAm grundinvest (€2.03bn).
In the KanAm calculations, fund performance is still being measured from five years before the final fund suspension and until August 31st 2015. By this measure, funds still delivering a positive annual performance are SEB ImmoPortfolio Target Return, KanAm US-grundinvest, SEB Immoinvest, KanAm grundinvest, CS Euroreal, KanAm Spezial grundinvest, HansaImmobilia und CS Property Dynamic.
Delivering a negative return are all the others, headed by Degi Global Business (-7.1% p.a) and Morgan Stanley's infamous P2 Value Fund (-6.4%).
KanAm also uses a tool called the Sales-Rate-Factor to determine whether individual funds will have sold off all their assets by their final wind-up date, based upon their speed in selling their assets to date. A factor of above 1 means that the fund needs to step on the gas to beat their deadline, below 1 means they're moving along at a good clip.
Those needing to step up the pace had included at the time of the study KanAm's own grundinvest (Factor 1.4) and CS Euroreal (1.6). Way behind is SEB Immoinvest, at factor 4.5. (Since then KanAm has sold the €200m-plus London office of Thomson Reuters in Canary Wharf, and cleared all the €2.3bn loans outstanding on its grundinvest fund).
Those ahead of target are SEB ImmoPortfolio (0.6) and SEB Global Property Fund (0.7), while Degi German Business has a factor of 1.1, with only five assets worth €27.5m still to sell off.