German real estate fund crisis continues as AXA extends fund closure

The German property fund sector remains in turmoil following the announcement Axa Real Estate has extended the closure of its €2.7 billion property fund for another twelve months.

The Axa Immoselect property fund was due to reopen later this month after a challenging couple of years for the firm but it chose to extend the open-ended property fund’s closure due to ‘insufficient liquidity to comply with all the anticipated redemption requests.’

It is the latest casualty in what has been a turbulent year for German real estate funds with repeated closures and investors plagued by uncertainty. The past two months have been particularly troubling with Aberdeen Real Estate and KanAm announcing the liquidation of their €1.3 billion DEGI Europa fund and the €526 milion US-Grundinvest fund, respectively, while Morgan Stanley followed shortly after in October dissolving its €850 million P2 Value fund.

These announcements came ahead of a German deadline to end asset withdrawal suspensions after a two-year period, which Axa Investment Manager Deutschland managing director Achim Gräfen said would lead to further unrest in the market. In this volatile environment, it was difficult for them to sell their properties at an attractive price, Gräfen added,.

‘We understand we are demanding a great deal of patience from our investors during this time, but the sale of large property portfolios, at inappropriate terms, would jeopardise Immoselect’s performance. We now have a further 12 months to assess the reopening of the AXA Immoselect fund.’

The Frankfurt-based director said the firm was hoping the adoption of the German Investor Protection Act, which is currently pending the legislative process, would reassure the market for open-ended real estate funds.

‘We continue to believe in the success of AXA Immoselect's underlying concept. The fund operates a highly diversified European real estate portfolio without US or Asian real estate, which has shown a much higher volatility. The re-opening of the AXA Immoselect fund has top priority for us.’