Enterprising approach for pub sector
WHEN DEUTSCHE BANK decided not to provide a liquidity injection to its $7.2 billion Grundbesitz Invest open-ended property fund to protect it from a revaluation at the end of 2005, something was clearly afoot in the world of German real estate finance. This kind of thing simply isn’t done – German sponsor banks have always stepped in to buffer these property funds. Deutsche, however, decided simply to offer compensation to investors that had bought in over the previous two years. The move – while triggering a crisis in the open-ended fund sector that is only now abating – has been seen by some as a sign of things to come: the mere fact that real estate investment trust legislation is being discussed in a country can be enough to change established patterns of behaviour among both lenders and property companies. And this is just the situation in the UK and German real estate markets in mid-2006.
Both the UK and now Germany have indicated that they will introduce Reit legislation in January 2007. UK plans are well advanced while the likelihood of Germany meeting the deadline is certainly questionable. But the public equitization of the two largest real estate markets in Europe would mark a seismic shift towards the US real estate funding model by the region.
