#MIPIM Discounts on sales by GOEFs in liquidation hit record levels

German open-ended funds (GOEFs) sold €3.3 bn of commercial property assets in 2014 at a record discount of -20% against their book value, according to research released by DTZ on the first day of MIPIM.

DTZ’s sixth bi-annual report on the liquidation of GOEFs shows the selling process continues to provide opportunities in a wide range of countries with liquidating funds expected to sell €11.7 bn of European assets over the next three years.

German open-ended funds hold €81 bn of property assets worldwide – of which €12.8 bn (nearly 16%) are to be sold by 2017 as 18 different funds enter their liquidation phase. European assets will account for the overwhelming majority of disposals with the €11.7 bn of sales concentrated mainly in Germany (34%), the Benelux (22%) and France (16%).

€10b sold since 2012
The liquidation of GOEFs has already provided the market with €10 bn of sales since 2012. After accelerating in H1 2014, sales volumes slowed down in H2, resulting in a yearly total slightly below the 2013 volume of €3.5 bn.

The geographic focus of sales changed dramatically during the last 12 months. Sales activity in the first half of the year was mainly outside the three core markets but the latter six months showed a strong comeback by Germany and France as the most active markets for liquidation.

While the volume of sales recorded in 2014 remained high, prices achieved by the liquidating funds declined significantly compared to the start of this process. A 3% premium on 2012 sales has collapsed to a 20% discount for disposals across the last two years.

Comment
Magali Marton, head of EMEA research at DTZ, commented: 'The biggest discounts were recorded for the most urgent disposals from funds that were set to be liquidated in 2014, but we also saw some long-term liquidation in specific countries within southern Europe, CEE and Benelux. Numerous sales occurred in Germany in 2014 at 14% below their book value, up from 8% just a year ago as many sales occurred in non-prime locations.'

Fewer sales are expected in 2015 than in recent years, however, target liquidations for 2016-17 are large across Germany, Benelux and France.

Nigel Almond, head of capital markets at DTZ, added: 'We expect discounts on book value to remain high regarding the upcoming sales of liquidating German open-ended funds. This will provide attractively priced opportunities for investors needing to deploy capital across Europe.'

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