Only the big will survive under 'tsunami' of regulation

Only the bigger real estate companies will survive under the tsunami of regulations, predicted Axel von Goldbeck, managing director of the German Property Federation ZIA.

Costs are rising as fund managers are being forced to price in the costs of risk and liability and the potential of fraud or the failure of local custodians. But it is not all bad, he said.

‘There are also positive things, definitely. Basically there are three types of investment vehicles: open, closed and listed. The closed funds were a grey area and unregulated. We’re happy that they will be regulated now. Some players will die, but the survivors will be stronger. And there are a number of benefits to being part of a harmonised European market and regulation. The downside is that they will have to deal with constantly changing legislation, which is still a learning process at EU level, and a constantly changing regulatory environment. But they will be able to manage it.’

Von Goldbeck made the comments at the PropertyEU Regulatory Investment Briefing at Realty in Brussels at end-May.

Regulation is creating a schism between larger and smaller fund managers, agreed David Ryland, partner funds & indirect real estate at law firm SJ Berwin. There have been a lot of uncertainties about AIFMD regarding the definition of an AIF and whether joint ventures will be exempted. Another issue is whether new need funds need to be AIFMD-compliant to raise equity, he added. ‘The larger fund managers are likely to do better. The smaller players can’t accommodate the costs.'

The full story - Regulatory sea needs nagivators - appears in the July-August edition of PropertyEU. You can read it as well as watch the video interviews from the event by clicking on the links below.