GERMANY - Large investors in German open real estate funds could be legally prevented from withdrawing their money at any time in situations where the funds are suffering liquidity problems.

"We are expecting the suggested reforms to be put into legal reality this year," a spokesman for the federal investment association BVI told IPE Real Estate.

The BVI created a list of suggestions last year for tackling the problem of German real estate fund liquidity, which included the introduction of a legal 12-month notice period from any large investor who wished to withdraw new investments.

German investment law will have to be adjusted to incorporate the introduction of UCITS IV regulations so this review of legislation might also be used to change the rules concerning open real estate funds too.

Despite the issues being raised, Michael Vogt, chief executive of Patrizia KAG, argued open investment fund vehicles would still be a good solution for many investors.

"Daily liquidity is the right thing for small investors and open real estate funds have been a success story for 50 years - the system only got sick when some companies let large investors invest in bulk and granted them the same rights to withdraw money as they did small investors," said Vogt.

Some companies have already introduced notice periods and different investment rules for institutional investors following the credit crunch and its impact of real estate fund redemptions.

"The main priority is to safe small investors who often do not move their money as fast as larger investors," noted Vogt.

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