GERMANY - Hamborner has become the third real estate company in Germany to convert to a real estate investment trust (REIT) status, prompting speculation that the country's REIT may finally start to grow.

Hamborner REIT AG is the first company in Germany to make the conversion since the start of the financial crisis, which had hampered any growth in the sector.

In addition to the difficult market environment of recent years, one of the biggest obstacles to the growth of the REIT sector in Germany was the ban on residential assets within REIT holdings.

Hermann Aukamp, managing director at Nordrheinische Aerzteversorgung (NAEV), told IPE Real Estate in 2008 that the pension would have considered placing some of its real estate into a REIT structures were it not for the rules against residential assets.

The rules have since been modified so that residential assets can be included, but only for properties built after 2007.

CR Capital Real Estate, which specialises in German residential, has also announced plans to convert to a REIT in 2011.

Only two REITs were launched in Germany before the credit crunch - Alstria Office REIT and Fair Value REIT - but the latest announcements have fuelled speculation that the sector might be ready to establish itself.

That said, some market commentators are not so sure, including Patrick Sumner, head of property equities at Henderson Global Investors.

"Investor demand for REITs is limited, mainly because the unlisted alternatives are favoured," he said.

"Institutions prefer the Spezialfonds route, where they have some control, while private investors tend to be pushed into the open-ended funds, ostensibly because of the lack of volatility, but also because of the fees paid to the intermediary."

Sumner added: "I cannot see much new issuance happening anywhere in Europe this year, although investment bankers all say there is a full pipeline.

"I doubt that there are enough sufficiently exciting strategies, and there is not much money available.," he added.

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