GOEF divestment ‘would increase Eastern European transactions’

Colliers International, the global real estate investment service, has released a report stating that the divestment of German Open-Ended Funds (GOEFs) would boost office space transactions in Eastern Europe.

Property assets worth €83bn globally were being held in GOEFs as of December 2012, with the majority centred in Eastern European markets including Poland (55%), the Czech Republic (28% and Hungary (8%).

The value of these assets – of which commercial offices account for approximately 68% - is thought to be in the region of €4.5bn. Commercial retail properties account for a further 22% of GOEF-held assets.

The GOEF structure is a mutual fund with the capacity to continually create shares on demand, allowing shareholders to purchase funds at net asset value and redeem at any point for the prevailing market price.

The report states that the further divestment of GOEFs will help to “positively increase transaction activity in Poland and Czech Republic” by freeing up assets, although the liquidation process is expected to be gradual and not result in a sudden flooding of the market.

Acquisitions made using funds in the GOEF structure have been in decline since 2010, as conflicting interests between retail and institutional investment groups, as well as property market conditions in the aftermath of the financial crisis, have rendered the method unworkable.

11 GOEFs, which had been active in the Eastern European market, have already announced plans to liquidate as a result, with a further four expected to make similar moves within the next five years. The total value of the 39 assets acquired under the 11 GOEFs set to be liquidated is €2.175bn, which equates to approximately 50% of total acquisitions made under GOEFs in Eastern Europe.

The rise in popularity of Spezialfonds has limited the growth of the GOEF sector in recent times, with the global value of GOEF assets falling from €85.1bn to €83.1bn during Q4 2012. Despite this, the GOEFs that remain in place are predicted to perform strongly on the Eastern European market, as evidenced by the €600m combined purchases from Union, Deka and RREEF at the close of the last quarter.

Last week, Search Office Space reported on Skanska's €94.6m sale of the Nordea House and Green Corner office complex to RREEF, with the eco-offices boasting a 95% pre-let as businesses clamour for executive space outside of the established corporate centres of London, Paris and Berlin.