More sales expected as German open ended funds liquidate – DTZ

An estimated €21bn of commercial real estate assets is set to come to market by 2017 as the direct result of the increasing number of German open ended (GOE) funds liquidating.

A report from DTZ reveals the impact of the liquidation so far of 14 GOE Funds and the subsequent impact on capital values of commercial property in affected regions. Four other funds are frozen and could liquidate by 2014.

That is likely to mean a decline in capital values in some European markets, in particular Benelux, which will face an oversupply of investment opportunities, the report said.

In 2012, assets sold by GOE funds in liquidation process or frozen accounted for €3.4bn through 27 deals, for the European component of their portfolio.

Most of these sales were concentrated in France (41%) and the UK (31%) where funds benefited from favourable market conditions and attractive pricing. “Surprisingly,” the report noted, “GOE funds have been quiet in their domestic market which accounted only for 20% of the assets sold in 2012.”

The value of GOE funds in liquidation or frozen globally declined from €25.8bn at the end of 2011 to €21bn at the end of 2012, posting a €4.8bn or 19% average decline of their assets’ portfolio value.

SEB ImmoInvest and CS EuroReal posted the biggest decrease with net value of their assets under management down by €1.7bn and €1.1bn respectively in one year.

Funds with an end date in 2013 were less active than expected in 2012, with €1.7bn of assets still to sell in their portfolio, DTZ said. More activity from these funds is expected in the course of 2013, including in Germany and the Netherlands.

Magali Marton, head of CEMEA Research at DTZ and author of the report, said the peak of the liquidation process will be reached in 2014 with the shutdown of three funds, including AXA Immoselect (€2.2bn of AUM) and Degi International (€1.3bn).

“In 2017 we will also see the expiration of mandates for the two biggest GOE funds in liquidation, SEB ImmoInvest and CS EuroReal. Each of these two funds still holds more than €4.5bn of assets in their portfolio. The liquidation process of GOE funds is still far from complete and the value of assets accounts for a total volume of €20.6bn globally, of which €18bn is located across Europe.”

By size, European assets make up the majority of their portfolio with 6.5m sq m to be sold between now and 2017. Assets held by GOE funds in liquidation are predominantly located in Germany (2.1m sq m or 33% of leasable space total volume) and in Benelux (1.3m sq m or 19%). Southern Europe ranks third, with GOE funds accounting for 1.1m sq m.

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