Limited fallout from Japan crisis on German funds

Union Investment's move to temporarily suspend redemption of units for its open-ended real estate fund UniImmo has not so far had any followers from other German real estate funds with assets in Japan. The Hamburg-based open-ended fund manager announced the move late last week, citing the nuclear crisis in Japan.

According to one real estate analyst who asked not to be named, Union Investment seems to be an isolated example: 'I think it could be a one-off. For most of the other funds, Japan only represents a small amount of the total of assets under management. Morgan Stanley’s P2 fund invested in Japan but it’s being liquidated anyway,' the analyst said.

Morgan Stanley's P2 fund has around 14 properties in Japan, together with another fund, Marc Weinstock, executive director of Morgan Stanley Real Estate, told PropertyEU. 'We haven't sold anything in Japan so far and now is not the time to do so,' he said. Some of the properties are believed to have suffered 'minor damage' in last week's earthquake, Weinstock added.

Deka Immobilien told PropertyEU that it had no plans to freeze its Deka-ImmobilienGlobal fund, which has exposure to the Japanese market. According to Torsten Knapmeyer, managing director of Deka Immobilien and WestInvest, the fund has only invested in four properties in Japan, two of which are in Tokyo, with the remaining two in Osaka.

'According to our information, these properties have not been damaged,' he said. Deka-ImmobilienGlobal had EUR 3 bn of AUM as of 28 February 2011, of which assets in Japan accounted for about EUR 422 mln.

A Deutsche Bank spokesman told PropertyEU that RREEF funds will also remain open. Credit Suisse's CS Portfolio Real fund - a real estate umbrella fund - also invests indirectly in Japan, although there are no plans to halt redemptions, a Credit Suisse spokeswoman said. SEB Asset Management does not plan to freeze any funds either as it only holds two properties in Tokyo.


According to Alessandro Bronda, head of global property at Aberdeen Asset Management, it is very much business as usual at the fund manager's two Asian fund of funds, which had around $ 1 bn of AUM combined as of end-February.

Indeed, despite the ongoing Japanese catastrophe, Aberdeen Asset Management is pressing ahead with its plans to launch a third Asian fund of funds this year. The fund, which has a target size of around $400 mln, is expected to have its first closing in the second quarter. Around 40% of the fund will be able to invest in Australia, Singapore, Hong Kong and Japan; 40% in China and India and 20% in markets such as South Korea and Malaysia, Bronda told PropertyEU.

The fund has a target net annual return of 17%. The fund manager will wait and see how it 'plays out' in Japan before deciding what to invest in there, Bronda said. 'But we remember the Kobe earthquake in 1995, which didn’t have a big impact on the Japanese property market,' he said.

Japan has proved a popular choice with international real estate investors in recent years. Around EUR 26 bn has been invested by foreign players into Japanese real estate in the last five years, or around 20% of the total invested, according to David Hutchings, head of the European research group at Cushman & Wakefield in London.

In a bid to prop up the market, the G7 group, which includes Germany, the UK and the US, stepped into the currency markets last Friday to curb the soaring yen, joined by the Bank of Japan. Japan's Nikkei share index rose 3% on the news, but ended the week down by around 10% - its biggest weekly fall since the banking crisis in 2008.

Yet much depends on how the situation in Japan unfolds in coming weeks, Marcus Lemli, head of capital markets at JLL in Germany, told PropertyEU. 'The situation in Japan is unprecedented. If it comes under control, it could be back to business as usual. If not, there might not be a property market there for some time.'