EUROPE – Three German open-ended funds (GOEFs) could offload assets worth as much as €1.4bn this year in a move likely to destabilise pricing in the Dutch market.
According to a note from DTZ, GOEFs scheduled to lose their mandates this year – HansaImmobilia, Degi Europa and Morgan Stanley P2 Value – will be forced to sell German, Dutch and Benelux assets.
While the buoyant German market will enable it to absorb the influx, Benelux markets will likely see a decline in pricing.
Investment volumes in the Dutch market last year (€3bn) trailed the €5.7bn annual average, which has encouraged GOEFs not required to liquidate until 2017 to wait for more favourable pricing.
In contrast to last year's sales in France (41%) and the UK (31%), where investor appetite was greatest for lot sizes above €100m, limited activity in the Dutch market has been dominated by domestic investors scouting small and mid-sized lots.
DTZ said some price adjustment would likely be necessary in Benelux assets that make up 19% of GOEFs' overall portfolios "to ease the deal-making process" in a market that has failed to attract cross-border capital flows.
Up to now, GOEFs have been relatively reticent to sell in their domestic market despite German assets making up 33% of their combined portfolios.
The exception has been a small number of modestly sized – and secondary – assets.
However, DTZ suggested favourable market conditions, strong market activity last year and Germany's status as a safe haven could accelerate disposals.
Anticipated sales this year are relatively modest compared with an anticipated peak in liquidations in 2014, when four funds will close down.
The two largest GOEFs – SEB InnoInvest and CS EuroReal, each with remaining assets worth €4.5bn – are scheduled to close in 2017.
Asset sales from the two funds combined accounted to 60% of the decline in value recorded for GOEFs last year.
Overall, DTZ estimates 18 funds either in the process of liquidating or scheduled for liquidation by 2017 will eventually offload European assets worth €18bn onto the market.
It anticipates record closures of funds holding assets in Southern, Central and Eastern Europe in 2014.
Assets in France and the UK, which dominated sales last year, will again account of the highest volume of sales in 2016-17.
