KanAm Grund KAG will liquidate its 3.92 billion-euro ($5.3 billion) Grundinvest fund, making it the largest German mutual property fund to be wound up after failing to raise enough money to meet investor withdrawals.
Grundinvest, which suspended redemptions in May 2010, had two years to sell assets and raise sufficient cash to return to investors. The fund will now be liquidated and money returned by the end of 2016, Frankfurt-based asset manager KanAm said in a statement today. About 200 million euros will be paid back in the weeks ahead, it said.
The liquidation “leaves little doubt that German open-ended fund disposal activity will accelerate in the mid-term,” said Iryna Pylypchuk, an associate director of research at property adviser CBRE Group Inc. who’s based in London.
KanAm cited Europe’s sovereign-debt crisis and concern among German savers about investment in the country’s mutual property funds for its inability to reopen Grundinvest. Since closing, the fund sold or agreed to sell 1 billion euros of property in Canada, Europe and the U.S. It owns 51 properties in nine countries with an estimated value of 6.3 billion euros, according to the statement.
KanAm hired Knight Frank LLP last year to sell the fund’s four London properties, which are valued at about 1 billion euros. Grundinvest owns the European Bank of Reconstruction & Development’s headquarters, Thomson Reuters Plc’s base in Canary Wharf, Deutsche Bank AG’s U.K. headquarters on London Wall and a building at 90 High Holborn. None of them have been sold.
Germany’s 85.2 billion-euro real-estate mutual fund industry may be facing the biggest crisis in its 50-year history. Thirteen of the 44 funds, which own 29 percent of the industry’s assets, are liquidating or have suspended redemptions, according to Frankfurt-based BVI Bundesverband Investment & Asset Management.
When the credit crisis started to escalate in 2008, a scramble to withdraw money exposed a flaw in real estate mutual funds that own properties directly. While investors are allowed to withdraw money daily, the funds hold assets that usually take months to sell.
Credit Suisse Group AG and Skandinaviska Enskilda Banken AB, or SEB, also face May deadlines to reopen funds for redemptions.
SEB’s asset management unit said Feb. 8 that it was working “intensely” on reopening the SEB ImmoInvest fund. The bank is trying to sell a 50 percent stake in Potsdamer Platz, a collection of 19 buildings in Berlin valued at 1.46 billion euros that includes the Grand Hyatt hotel and the Arkaden shopping center.
“The market environment may not be easier after KanAm Grund´s decision, but we are focused firmly on our goal of re-opening,” the company said by e-mail. “Currently various property sales are being considered simultaneously, so that we still see a chance to generate sustainable liquidity.”
Credit Suisse said earlier this month that it’s in the process of selling 850 million euros of properties owned by its CS Euroreal fund and will decide in April whether it can reopen the fund. Credit Suisse said the fund currently has almost 1.6 billion euros available.
“We are confident that we will further increase liquidity for a sustainable reopening of CS Euroreal through further assert sales,” Karl-Heinz Heuss, managing director of Credit Suisse Asset Management Immobilien KAG, said in an e-mailed statement today. No one from SEB was available to comment.
Another three funds run by affiliates of Axa SA, UBS AG and Aberdeen Asset Management Plc must also sell assets this year to cover redemptions.