Colonia demands wind-up of fund with HSH Nordbank

Germany's Colonia Real Estate has said it sees no basis for a continued working relationship with HSH Equity Partner due to the continuing negative news coverage of the HSH-Nordbank Group and the resulting severe impact on sales. This relates particularly to the closed-end real estate fund HGA/Colonia CareConcept I.

Colonia said that although the placement period was extended, HGA Capital, the responsible subsidiary of HSH Equity Partners, failed to place more than around 29% of the planned volume in the market in spite of the product's exceptional ratings. By contrast, competitors were markedly more successful in placing products in the care facility real estate sector with concepts comparable to HGA/Colonia CareConcept I. Negotiations with institutional investors who had expressed an interest in the care facilities in September in response to the efforts of Colonia Real Estate AG were cancelled by the managing board of HSH Real Estate with no reason given.

The Board of Management of Colonia Real Estate AG saisd it blames the placement failure on the negative news flow regarding the HSH Nordbank Group and has demanded the complete wind-up of HGA/Colonia CareConcept I. Otherwise, placement guarantor HSH Equity Partners and thus the HSH Group would have to put up EUR 20 mln in capital, even though HSH Nordbank is already heavily dependent on government support programs. At the same time, Colonia Real Estate has rejected the draw-down of EUR 5 mln for the placement guarantee and today declared its withdrawal and termination of the contract. Colonia Real Estate believes that winding up the fund is the most reasonable alternative for all investors as well as for the shareholders of HSH Nordbank, as the sale of the care properties held in the fund portfolio should be possible with little or no loss.