Two of Germany’s open end funds platforms, Aberdeen’s DEGI Europe and Morgan Stanley’s P2-Value, have decided after a two year closing period that they will close the funds and sell all of their buildings.

Most of the investors that have put money into those funds are institutional investors, large funds of funds, and are now under pressure from their investors to pay the money back. Because most of the money is in real estate assets and there is not that much liquidity left in the funds to repay the investors, management has decided to close the funds, collecting fresh money from new investors or selling some buildings to meet the request from investors who want to get out.

Now, because the expectation by the management is that many more investors will call their money back, caused by the loss of confidence in the performance of those funds, they have taken the decision to close the funds.

DEGI Europe has a current value of €1.3 billion and P2 Value about €852 million (coming from €1.7 billion in September 2005).

They now have a three year period to sell the properties to avoid the need to sell for dumping prices. Every six months they will look at how much money they can pay back.

This provides some interesting opportunities and probably will be the start of many more products coming to the market place.

Demand for quality products exists, and it may be that the proceeds reached might be better than expected.

The German economy in general is recovering surprisingly well. In spring 2010 the growth of the gross national product was at 2.2%. This growth rate was surprisingly high and broke the mold by far. Primarily responsible for the growth were Germany’s export and building investments. Consumption and equipment investment gave strong impulses for increased economic activity as well.

The unemployment rate has started to fall slowly but constantly due to the fact that companies are engaging more people again. Only the inflation rate which was close to zero in fall 2009 increased and is currently at 1%.

The future prognoses stay optimistic. Experts expect a stable economic growth of about 2% for the upcoming year 2011.

Until the end of the third quarter in 2010, there were 1.34 billion SM rented in Germany’s top office market centres. Vacancy slightly increased since the last year. While the average vacancy rate of the German office market centres was 8.9% in 2009, it lies at almost 10% in the third quarter of 2010. Because of the increased willingness of the companies to recruit personnel and invest, the markets for office space and industrial sites are reacting positively over the next 8-12 months.

-Andreas Krone

Andreas Krone is the CEO of NAI apollo, NAI Global’s exclusive Member firm for the Frankfurt, Berlin, Dusseldorf, Cologne, Stuttgart and Muelheim an der Ruhr markets in Germany.