Open-ended real estate fund managers continue to reshape portfolios

Open-ended real estate funds held properties with an average value of EUR101 million in 2018, around 28 per cent higher than in 2014 after five years of consistent growth, while the average age of the funds’ properties also increased, says Scope.

Scope examined the size and age structure of properties in the 15 open-ended retail property funds whose portfolios consist predominantly of commercial properties. At the end of 2018, the funds together managed real estate worth more than EUR82 billion.

In particular, the share of properties in the EUR200 million to EUR500 million range rose to 31 per cent of the total, up from 25 per cent in 2014. The share of properties with a market value of more than EUR500m more than doubled in the same period to 9 per cent from 4 per cent.

The funds with the highest proportions of real estate with a market value of more than EUR200m are: UniImmo: Europa (60 per cent), hausInvest (50 per cent), UniImmo: Deutschland (47 per cent) and Deka-ImmobilienEuropa (43 per cent).

The funds have reduced their holdings of smaller properties by nearly half in five years. Whereas in 2014 the properties with a market value of less than EUR50m accounted for 16 per cent of the portfolios, in 2018 it was only 9 per cent.

“A major reason for the trend is asset managers’ growing preference for larger properties, with appreciation of properties playing a relatively minor role,” says Frank Netscher (pictured), analyst at Scope.

“The funds have tended to buy larger properties and sell smaller ones: To soak up extra liquidity and also make gains in efficiency by reducing administrative and maintenance costs relative to the value of the portfolio,” says Netscher. The average size or value of newly acquired properties exceeded EUR120m in each of the past four years compared with just EUR84 million in 2014.

The average age of the funds’ properties rose to 14 from 12 years since 2014. In particular, the proportion of properties aged between 15 and 20 increased to 22 per cent from 11 per cent. The proportion of fund properties that were less than 10 years old decreased significantly to 28 per cent from 45 per cent in the same period.

Looking at funds holding assets of more than EUR1 billion, three Union Investment funds have the highest proportion of newer properties (<10 years). At UniInstitutional European Real Estate, these properties currently account for 42 per cent of the portfolio. The next are UniImmo: Deutschland with 35 per cent and UniImmo: Europa with 33 per cent. Deka-ImmobilienGlobal (33 per cent) and grundbesitz europa (31 per cent) also hold more than 30 per cent of newer properties.


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