Morgan Stanley has extended the freeze on redemptions from its EUR 2 bn P2 Value German open-ended real estate fund, warning of possible further writedowns amid ongoing market uncertainty.
Morgan Stanley has extended the freeze on redemptions from its EUR 2 bn P2 Value German open-ended real estate fund, warning of possible further writedowns amid ongoing market uncertainty.
The US bank said it plans to sell some of the fund's assets and re-open the troubled investment vehicle. A new business plan is to be presented to investors later this year. 'However, a liquidation cannot theoretically be ruled out,' Water Klug, head of Morgan Stanley real estate, told newswire Reuters.
A freeze of redemptions of the fund which has investments in Japan and Europe was initially imposed in October 2008 as the credit crisis shock the markets.
Morgan Stanley said on Monday that the redemption freeze would stay in place until end-October this year and that all unit sales had been suspended. 'The market situation is continuously difficult and therefore markdowns cannot be ruled out in the periodic valuations,' the company said.
The announcement follows hard on the heels of freezes imposed or extended by a raft of German open-ended funds, including the Degi International and Europa funds, Axa Immoselect, Kanam Grundinvest, and SEB Immoinvest.
The attraction of the German open-ended funds is that investors can theoretically exit at any time. But the funds’ ability to offer instant liquidity in the fundamentally illiquid property sector has been severely tested by plunging property valuations and the pendulum swinging in favour of buyers in the investment market.
The German government is currently considering proposals which would compel investors to hold their units in the funds for at least two years, and extend the waiting periods for redemptions.