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The Austrian open-ended public real estate fund LLB Semper Real Estate is to be liquidated, marking the first failure of its kind in Austria during the current real estate downturn. The fund’s collapse, with €615 million in assets, and a strong bias towards German commercial properties, highlights how liquidity stress can overwhelm even well-leased portfolios when market conditions deteriorate. Although Semper's failure cannot be directly mapped onto the German fund landscape, the structural warning signs are difficult to ignore.
Semper had already suspended share redemptions in October 2023 after investor withdrawals sharply depleted its liquidity buffer. Despite 15 property sales and efforts to stabilise cash flow, LLB Immo KAG, the management company, conceded defeat: asset sales could not meet redemption demands without breaching statutory liquidity requirements. In a statement, the management said the termination was necessary "to ensure equal treatment of investors, as the fund's liquidity situation means that a sustainable resumption of redemption price payments cannot be guaranteed." The fund’s official termination date is set for 23 October 2025, with liquidation proceedings commencing the following day.
The fund’s vulnerabilities were acute and layered. Around two-thirds of its portfolio was invested in German cities, often outside prime A- and B-locations, with significant exposure to office buildings, hotels, and logistics assets. Properties included Job Centres in Kassel and Bremerhaven, secondary hotels operated by Dorint and Ibis, and various office and retail assets in Leipzig, Ratingen, and Chemnitz. These assets proved harder to liquidate at acceptable prices amid rising yields and frozen transaction markets. Although Semper’s occupancy rate was close to 96% and its WAULT around ten years, these factors provided little defence against collapsing liquidity when valuations began to fall.
Structural weaknesses compounded the situation. The fund’s debt ratio had risen to 43%, well above the 30% cap imposed on German open-ended funds since 2013. Moreover, Austria’s delayed adoption of minimum holding periods and notice requirements left Semper unusually exposed to redemption runs. The new rules will only take full effect in Austria from 2027, too late for Semper and its investors.
Experts: Limited Parallels with German Funds
Fund specialists argue that Semper’s collapse should not be seen as a direct harbinger for German open-ended real estate funds. Fund expert Sebastian Lohmer points out that 'regulations comparable to those in Germany with blocking and redemption periods are currently still lacking or will only be introduced in Austria with a transition period in 2027.' Prof. Steffen Sebastian of IREBS adds that although liquidity risks are evident in German funds as well, 'the crisis of the Semper fund is a completely different case,' citing the fund's weaker sponsor network and focus on commercial properties in difficult locations. German funds benefit from larger scale, stricter regulatory frameworks, stronger liquidity management, and, crucially, more diversified portfolios weighted more heavily towards prime residential and office assets.
Yet vulnerabilities persist. Liquidity ratios, though nominally compliant, have been tightening. German funds must maintain at least 5% of assets in liquid form, but the real test will come if redemption pressures intensify and transaction volumes continue to stall.
BNP Paribas Real Estate Investment Management Germany’s decision in 2023 to terminate its Inter Immo Profil fund, albeit a much smaller vehicle, showed that German managers are also navigating delicate liquidity balancing acts. Rising office yields, loan refinancing difficulties, and tenant market uncertainty across Germany's secondary cities present risks that even the largest open-ended funds cannot dismiss lightly.
Semper’s experience offers several clear lessons. First, liquidity is not an abstract buffer: it must be backed by genuinely saleable assets at close to book value. Second, long lease terms and high occupancy, while valuable, are no protection when market liquidity dries up. Third, heavy commercial exposure outside core markets severely constrains the ability to sell assets without material losses. Fourth, excessive leverage is a liability in any downturn, regardless of portfolio strength.
While LLB Semper Real Estate’s collapse is primarily a reflection of regulatory shortcomings and poor asset positioning, it reinforces the reality that open-ended fund structures are fundamentally exposed to liquidity shocks in periods of market stress. German funds have built stronger bulwarks since the last crisis, but the discipline of liquidity management and portfolio quality remains paramount. The next 12 to 24 months will be the real test.