UBS Euroinvest Immobilien has become the latest German open-ended real estate fund (GOEF) to be closed because of liquidity issues.
UBS it would have to suspend the redemption of share units for the fund which holds 47 properties worth €1.4m as per end-June 2014. The suspension is limited to 12 months from 4 July, although this could change.
The asset manager cited “continued difficult real estate markets” as well as “other factors” to explain why some of the properties had fallen in value, leading to a performance loss.
“Ultimately, several investors decided to reduce their commitment or quit the fund altogether,” UBS stated.
In mid-June the Munich-based UBS Real Estate KAG, which manages the fund, had announced the sale of two office properties from the fund in Frankfurt and Stuttgart for an undisclosed sum.
The former was sold to a German insurer, the latter to an “investor headquartered in Austria”.
A spokeswoman for UBS confirmed to IP Real Estate that these sales were made to create liquidity but stressed they were not part of a dissolution of the fund.
Around 65% of the fund is invested in commercial properties in France, Germany and Italy.
Last year, German rating agency Scope downgraded the Euroinvest fund from B+ to CC-, its most recent rating for the fund.
Scope said the fund had the “worst occupancy rate” among all funds it was rating with a quota of just 82.7% as per end of April 2014 – the average rate in the market is around 93%.
“Opportunities for sales of objects are actively sought but from Scope’s viewpoint the bad occupancy situation in several objects make a sale at an acceptable price difficult,” the rating agency had noted in a statement in early June.
In the wake of the financial crisis, several German GOEFs had to be closed because too many investors had exited creating liquidity problems.
According to the latest GOEF study by Scope issued in June, five funds improved their rating year-on-year, eight remained at the same level and another five had to be downgraded.
Euroinvest was the worst-rated fund among those with institutional investors as well as overall.
The best-rated institutional funds were WestInvests logistics and hotel funds at AA.
Scope found in a survey for the study that the majority of providers wanted to increase their institutional focus over the coming years.