GERMANY - Aberdeen Immobilien, the property arm of Aberdeen Asset Management, has announced the dissolution of one of its German open-ended property funds (GOEFs) following concerns over its liquidity.
The liquidation of Degi's Global Business fund comes in the wake of several similar closures, including TMW Immobilien Weltfonds and Degi's sister fund Degi Europa.
The liquidations have been triggered by both the market downturn and subsequent decline in property prices, as well as changes to regulations governing such GOEFs.
Aberdeen said the fund would be wound up by the end of June 2014 at the latest, after share redemptions were suspended in November 2009.
It initially closed the fund after several participants announced their intention to redeem shares, with the fund unable to service all requests due to a lack of liquidity.
Aberdeen said holdings in Croatia and Romania had suffered "particularly severe losses", impacting returns that, until mid-2009, were still averaging 5%.
It said: "The lion's share of redemption demands stemmed from the shift in preference of many institutional investors toward increased liquidity in the wake of the financial crisis."
It noted that, in an attempt to create further liquidity, two properties were sold at a combined market value of €55m before the end of June.
However, the liquidity created was insufficient to serve all outstanding demands.
Aberdeen said: "The property sales that were still needed would have decimated the portfolio to such an extent that its continuation would no longer have been economically viable."
It added that the dissolution by mid-2014 would allow for both the repayment of equity and debt capital.
The fund currently holds 11 properties valued at more than €250m, with a corresponding liquidity quota of 12.8%.
Two properties - located in Cologne and Helsinki, respectively - are currently also being considered for sale, with Aberdeen hoping to gain the combined market value of €50m for the units.
Germany's open-ended funds have suffered a number of setbacks in recent years, with several suspending trading in the wake of the financial crisis.
CB Richard Ellis had previously warned this November would mark the "next milestone" for GOEFs, with the two-year limit on fund suspensions coming to an end. Two other funds suspended share redemption at the same time as Degi Global Business.
Additionally, legislative changes that came into force last March have meant institutional investors are effectively barred from further investments in GOEFs, with Schroder Property recently predicting they would instead opt to deposit money in Spezialfonds.