The European Public Real Estate Association (EPRA) has slammed what it describes as the German government’s insistence on propping up the ailing open-ended fund structure (GOEF) with reactive legislative changes - at the expense of efforts to grow the publicly listed property market in Germany.

The European Public Real Estate Association (EPRA) has slammed what it describes as the German government’s insistence on propping up the ailing open-ended fund structure (GOEF) with reactive legislative changes - at the expense of efforts to grow the publicly listed property market in Germany.

Epra has long been calling on German officials to use the legislative changes to the GOEF rules as an opportunity to address the imbalance in the German market. Today, the German government is expected to announce 'a further set of makeshift measures', the assocation for the European listed property sector said in a press statement. These include the introduction of a minimum holding period for all investors of two years, with penalties for redemptions in years three and four, and possibly measures to allow more freedom to retail investors when redeeming their units. 'The underdeveloped listed property market in Germany should be a major concern to German investors,' the organisation said.

Philip Charls, Epra CEO said: 'The problems that the German open-ended funds face are similar to those seen in the past in other countries like the Netherlands, Australia and the US. The suggestions we have made, to allow unit holders to convert the fund assets and liabilities into a REIT, have been successfully used in the past in similar situations where the result was the constitution of a leading listed real estate sector, improvement of transparency, and better investor protection.'

Approximately EUR 25 bn of the GOEF’s EUR 88 bn in assets under management is believed to be tied up in funds having suspended redemptions. At least three of the larger funds are currently in liquidation.

Charls added: 'A healthy real estate sector needs a good balance of listed and private investment vehicles - both from an operational perspective and to ensure the right investment opportunities are available for the broadest range of investors. Whether the current flavour of the month is GOEFs or Spezialfonds (special fund for institutional investors ed.), it is clear that Germany needs to have a relevant listed property sector. By missing this opportunity, the German government is papering over the cracks and ignoring a broader problem - to the detriment of the investing public.'

The bigger problem that Epra is seeking to address is the relatively small size of the German publicly listed sector. As of September 2010, of the 10 largest global property markets (with the exception of Italy at 0.6%), Germany has the lowest proportion of its underlying real estate held within the listed sector at only 1.6%. This compares with France at 5%, the US at 5.8%, Australia at 16% and a global average of 5.1%.

Epra claims that a larger German listed real estate sector would result in an improvement of longer term returns for its shareholders in combination with better liquidity and a more transparent investment product for its investors. Greater liquidity in the property market would also contribute to a more stable economy, due to higher standards of management and reporting ensuing from the scrutiny of the public markets as well as a regular and reliable source of tax revenue for the government through the receipt of dividends withholding tax.