RREEF to launch EUR 1.3 bn UK property fund

RREEF, the global alternative asset management arm of Deutsche Bank, is to launch a £1 bn (EUR 1.3 bn) UK fund targeting 'index-linked returns' before the year-end, well-informed sources have told PropertyEU.

The new fund, which will target prime properties, will become RREEF's biggest fund in the UK behind its UK Core Property fund, which invests in offices, retail and industrial space. The advantage of investing in property with index-linked leases is that it is widely-regarded as a very stable asset class, much like bonds - which is likely to appeal to a wide-range of investors seeking a safe haven for their capital. RREEF declined to comment.

According to CBRE's UK monthly index report, published earlier this month, UK commercial property performance has been muted this year, with total returns of just 0.8%. Capital values have fallen by 2.6% this year, with offices seeing the best and worst regional performance. Central London, particularly the West End, has fared better with capital growth of 0.4% in July.

However, given RREEF’s uncertain future - Deutsche Bank failed to sell it to US based asset manager Guggenheim Partners back in June - some analysts are wondering how easy it will be to raise capital until a sale is finalized.

The sale to Guggenheim Partners likely failed because the asking price was too high in the current climate, according to those who track the market, who also cited management changes for scuppering the sale. RREEF, which has around EUR 47 bn of assets under management, was just the latest in a string of businesses that Deutsche Bank has tried but failed to sell to Guggenheim Partners, including DWS Americas, the Americas mutual fund business.

Deutsche Bank announced in November that it would put RREEF up for sale, prompted by new regulation and rising costs. Deutsche Bank has never disclosed its target price for RREEF. However, it is trying to sell various divisions that analysts estimate could have a combined value of between EUR 1.5 bn and EUR 2.2 bn. The bank is expected to provide an update on RREEF next month.