While the real estate sector is potentially moving past the turbulence of the past few years and working toward recovery, German open-ended funds (GOEFs) are going through an earthquake of their own in the form of legislative changes and a wave of fund liquidations. With recent German legislation put in place to protect retail investors the divide between successful and troubled funds has grown even wider.
In a report titled German Open-Ended Funds: Changing Regulations for Changing Times written by Iryna Pylypchuk, associate director of EMEA research and consulting at CB Richard Ellis, successful funds will be obliged to look for new markets while maintaining a core strategy. For Central Europe this means that the Czech Republic and, especially, Poland, will receive investor interest from funds looking to buy.
The report identifies the “older and larger funds, with established distribution networks for individual investors” as having retained their liquidity and having continued to make acquisitions throughout the crisis, these being Deka Immobilien, Commerz Real, Union Investment and RREEF.
In early November RREEF acquired two Warsaw office buildings for €80 million on behalf of its open-ended grundbesitz europa fund from Warsaw-based Globe Trade Centre. Other funds have likewise declared a strong interest in investing in Polish property. ‘Poland is currently the darling of Europe, not only of Central Europe.’
“Poland, especially Warsaw is very much in the focus of institutional investors. One reason is Poland’s good economic situation. Warsaw is developing quite dynamically and is seen more and more as a place to be represented if doing business in the CEE countries. The strong tenant request is an indication of that,” Peter Heckelsmüller, head of acquisition for CEE countries at Deka Immobilien, told Czech Position.
In 2009 Deka was behind some of the biggest deals on the Czech office market but the fund’s sole acquisition this year in the Czech Republic took place in January when it paid €36 million in a sale and leaseback agreement for a Tesco distribution center in the Prague metropolitan area.
The reason for the shift in interest to Poland, according to Heckelsmüller, comes down to market size. “As the investment market in the Czech Republic in general is smaller than in countries like Poland, in 2010 we didn’t see that much attractive investment offers matching our investment criteria,” he said.
In Poland’s shadow
Nevertheless, Deka’s track record of deals in the country is likely to spur further acquisitions as more investment-grade properties come onto the market.
“Our recent acquisitions show that we were right in extending our activities in the Czech Republic. We invested in high-quality properties in strong locations with good tenants – one of the main reasons for us to still analyse the market and eventually take some interesting investment opportunities there,” Heckelsmüller said.
According to Richard Curran, managing director at CB Richard Ellis in Prague, the Czech market remains firmly set in Poland’s shadow at the moment. “Poland is currently the darling of Europe, not only of Central Europe, and is attracting a huge amount of interest as well as actual money to back up the interest," he said.
"Certainly when you talk to international investors they always say that in CE they are looking at Poland and the Czech Republic. The reality, I must admit, is slightly different. We’ve had investors looking at the Czech Republic, but there’s been little sign of real activity from international investors.”
Nevertheless, as the properties from liquidated GOEFs come to market, such as the buildings in The Park that were part of Degi’s Europa fund, as well as potentially other properties included in Degi two other frozen funds, it is the successful funds that will count among the most likely buyers.
