DTZ, a UGL company, has published an updated report revealing the impact of the current liquidation of German open ended (GOE) funds and the subsequent impact on capital values of commercial property in the affected regions.
In 2012, assets sold by GOE funds in liquidation process or frozen accounted for EUR 3.4bn through 27 deals, for the European component of their portfolio.
Most of these sales were concentrated in France (41 per cent) and the UK (31 per cent) where funds benefited from favourable market conditions and attractive pricing. Surprisingly, GOE funds have been quiet in their domestic market which accounted only for 20 per cent of the assets sold in 2012.
The value of GOE funds in liquidation or frozen globally declined from EUR25.8bn at the end of 2011 to EUR21bn at the end of 2012, posting a EUR4.8bn or 19 per cent 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 EUR1.7bn and EUR1.1bn respectively in one year.
Funds with an end date in 2013 were less active than expected in 2012, with EUR1.7bn of assets still to sell in their portfolio. More activity from these funds is therefore expected in the course of 2013 with sales anticipated in a wide range of European countries, including Germany and the Netherlands.
Magali Marton, head of CEMEA research at DTZ and author of the report, says: “The peak of the liquidation process will be reached in 2014 with the shutdown of three funds, including AXA Immoselect (EUR2.2bn of AUM) and Degi International (EUR1.3bn). 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 EUR4.5bn 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 EUR20.6bn globally, of which EUR18bn is located across Europe.
By size, European assets make up the majority of their portfolio with 6.5 million sq m to be sold between now and 2017. Assets held by GOE funds in liquidation are predominantly located in Germany (2.1 million or 33 per cent of leasable space total volume) and in Benelux (1.3 million or 19 per cent). Southern Europe ranks third, with GOE funds accounting for 1.1 million of sq m.
Marton says: “The market activity registered in Germany since the crisis, EUR24.4bn in 2012, and the perception of the country as a ‘safe haven in Europe’ make us confident about the capacity to absorb these opportunities. However, the analysis is different for the Benelux where the investment market activity is still minimal. In this context we can anticipate some price adjustment to ease the deals making process which will be operated in 2013.”