Wednesday, January 18, 2006

Second German Property Fund Freezes Assets

The Financial Times has a report on the real estate meltdown in Germany. "Further evidence emerged on Tuesday of the spiralling crisis in Germany’s open-ended property funds sector, as a second fund in as many months froze the assets of investors to prevent insolvency. KanAm, a privately owned asset manager in Munich, froze its US-Grundinvest Fonds, just five weeks after Deutsche Bank became the first company in the sector’s 40-year history to take such a step."

"Germany’s open-ended funds have €88bn of assets under management, most of it private investor money. But concerns about overvaluations of German assets and poor performance have prompted a run of withdrawals from some domestically focused funds. Deutsche Bank’s Grundbesitz-Invest fund remains closed pending a revaluation of its assets and an attempt to sell €1bn worth of property."

"KanAm said on Tuesday that 'strong redemption demand' on the fund meant that today it would have breached its 5 per cent minimum liquidity threshold, further highlighting the shortcomings of the open-ended structure and the mismatch between short-term cash flows and bulky assets."

"The fund’s problems have been triggered by its association with Mills, a US real estate investment trust that it founded, still co-owns and with which it shares two directors. Mills, which invests mainly in US shopping malls, has twice had to restate its accounts and is being informally investigated by the Securities and Exchange Commission."

"The news came as AtisReal, a property intermediary owned by BNP Paribas, the French bank, published figures showing record transaction volumes in German real estate last year, partly the result of heavy sales by open-ended funds trying to liquidate their assets. Last year, the open-ended fund sector had rare outflows, of €375m in the 11 months to November, reversing a startling €39bn of inflows in the previous four years."


At 10:38 PM, Blogger NurseLiz said...

I find this chilling!

At 11:51 PM, Blogger jeffolie said...

A third one bites the dust today.


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