REAL ESTATE – Germany’s DekaBank says it expects to complete the restructuring of its embattled German property fund well ahead of a previously given date of 2009.
Over the last two years, the fund has suffered more than €2bn in investor outflows. The outflows – mostly from institutional investors like small banks – were due both to the fund’s dismal performance and a scandal in 2004 that engulfed the entire management of DekaBank’s real estate fund arm.
Last December, DekaBank announced a sweeping restructuring of the €4.9bn fund to be completed by 2009. The measures included a fire sale of the fund’s foreign holdings – currently 21% of assets – and a reduction in exposure to logistical objects.
But speaking at DekaBank’s annual news conference, Fritz Oelrich, board member in charge of real estate, said the restructuring would be completed well before 2009. He noted that the sale of numerous property holdings were planned in just the next few weeks.
Oelrich also said DekaBank would again guarantee a 2% return for its German fund in 2006, adding that the cumulative costs to the fund provider were €260m. These include DekaBank’s €170m purchase of the new Skyper office high-rise in Frankfurt from the fund and a €90m cash injection. Nonetheless, the German fund continues to lose between €2m and €4m each day, according to DekaBank.
Regarding DekaBank’s other flagship funds, including its global and European property funds, Oelrich said returns for them would be between 3-4% in 2006. “If you ask me, whoever decides to exit these (property) funds now is making a mistake,” Oelrich told journalists the conference in Frankfurt.
DekaBank’s foreign property funds are also losing investors each day, though outflows from the European fund, at €10m, far exceed those of the global fund, which are less than €2m. Despite the outflows, DekaBank retained its title as Germany’s leading provider of open-ended property funds at the end of 2005 with a volume of €20.8bn.
Oelrich also confirmed that DekaBank would roll out German Real Estate Investment Trusts (REITs) once the government legalises them. That is expected to happen in early 2007.
He said, however, that DekaBank would not transform its current property funds in REITs, adding that instead the funds would invest up to 10% of their assets in the listed vehicles.
Separately, KanAm, a Munich-based provider of property funds, said it had re-opened its European fund and would re-open its US funds by the end of this month.
KanAm was forced to close both funds – which have the some of the best returns for this asset class – three months ago amid a wave of panic selling among investors.
KanAm attributed the panic to what it called “completely unfair” sell recommendations from the rating agency Scope.
