London&Capital’s GREF sees €63m value decline in one month

The drop in value in London & Capital's German Real Estate Fund highlights the ongoing polarization in Germany’s property market.

GREF has seen the gross value of its portfolio decline by €63 mln in the past month.

Colliers International, which valued GREF’s 12 properties at end-April, has marked down the value of the assets to €210 mln from €273 mln the month before, according to sources of PropertyEU.

The fall in value equates to a 23% drop in the gross value of the fund, and once gearing has been taken into account, a drop of 71% in the net asset value, showing the extent to which secondary assets are suffering in the country.

‘While the impact of the decline in the independent property valuations is clearly disappointing, neither the fund’s board nor the property adviser has control over market sentiment effecting property values,’ London & Capital told the fund's investors earlier this month in a note obtained by PropertyEU.

In total, GREF owns a 257,000 m2 portfolio comprising two shopping centres, four retail warehouses, one supermarket, four distribution units, one office building and one restaurant. The majority of the assets are located in former West Germany, with a large proportion in North Rhine Westphalia. The properties have a vacancy rate of 8.85%

In its most recent valuation report for the fund, appraiser Colliers said many of the retail properties in the portfolio are located in areas which are suffering both from high rates of unemployment, low purchasing power as well as negative population growth.

The broker, which was appointed valuer to the fund in 2006, noted that there is an increasing amount of transactional evidence on secondary properties which confirm lower values and higher yields.

'The company has been involved with the sale of many assets in 2012, which traded at an average discount of approximately 12% below our valuation. This confirmed the need for a reassessment of the overall portfolio value,' Colliers said.