OPEN-ENDED REAL ESTATE FUNDS IN LIQUIDATION THE INVESTOR'S VIEW

Transcription

1 OPEN-ENDED FUNDS IN LIQUIDATION THE INVESTOR'S VIEW An analysis of individual investment performance, real estate disposals, repayment of loans and payouts by German open-ended real estate funds. FEBRUARY 2015

2 OPEN-ENDED FUNDS IN LIQUIDATION - THE INVESTOR'S VIEW CONTENTS I. EXECUTIVE SUMMARY 3 II. INTRODUCTION 7 III. DISPOSALS / SALES-RATE-FACTOR 10 IV. REPAYMENT OF LOANS 16 V. PAYOUTS 18 VI. INDIVIDUAL INVESTMENT PERFORMANCE 21 VII. CONTACT FOR QUESTIONS AND SUGGESTIONS 26 LIST OF FIGURES FIGURE 1 Schedule of open-ended real estate funds in liquidation 6 FIGURE 2 Sold market value volume of open-ended real estate funds in liquidation 12 FIGURE 3 Calculation of SALES-RATE-FACTOR for open-ended real estate funds in liquidation 15 FIGURE 4 Current debt ratio of open-ended real estate funds in liquidation 17 FIGURE 5 Payouts by open-ended real estate funds in liquidation 19 FIGURE 6 Examplary investment cycle 22 FIGURE 7 Individual investment performance over the entire holding period for a period of 5 years before the respective suspension of unit redemption until 15/02/ FIGURE 8 Average individual investment performance p.a. for a period of 5 years before the respective suspension of unit redemption until 15/02/ OPEN-ENDED FUNDS IN LIQUIDATION THE INVESTOR'S VIEW FEBRUARY 2015

3 I. EXECUTIVE SUMMARY Real estate investment companies of German open-ended real estate funds (hereinafter referred to as "open-ended real estate funds") in liquidation are tasked with selling all of the real estate assets, repaying the loans to the banks and paying out the invested capital to the investors within the termination period. This study examined the following issues: How much have open-ended real estate funds in liquidation sold, and how many disposals are still outstanding? At the start of the liquidation process, the real estate assets of all 18 open-ended real estate funds in liquidation were EUR 33 billion in over 649 properties. By the cut-off date for the study, 15 February 2015, the open-ended real estate funds in liquidation had sold a total of EUR 17.5 billion in real estate assets 1, or 355 properties. Measured by market value volume, KanAm grundinvest Fonds an open-ended real estate fund for private investors sold the most at EUR 3.6 billion. Among the open-ended real estate funds for institutional investors, SEB ImmoPortfolio Target Return Fund achieved the highest sales volume at EUR 676 million. EUR 3.6 billion Highest sales volume In the case of open-ended real estate funds for private investors which have not yet sold all of the real estate assets, the UBS (D) 3 Sector Real Estate Europe has the lowest sales volume at EUR 272 million relative to its smaller fund size. CS PROPERTY DYNAMIC an institutional fund has sold the lowest sales volume at EUR 41 million by the study's cut-off date of 15 February Over three quarters of the remaining real estate assets totalling EUR 12.5 billion are divided between 3 funds: SEB ImmoInvest with EUR 4.3 billion, CS EUROREAL with EUR 3.2 billion and KanAm grundinvest Fonds with EUR 2.4 billion. These funds have until April 2017, or for KanAm grundinvest Fonds, December 2016, to dispose of their real estate portfolios. KanAm US-grundinvest Fonds was the only fund that sold all of its properties before the end of its termination period. HANSAimmobilia is a special case in that it sold all of its properties to a special fund belonging to the company. 1 Market value volume according to property records reported in the most recent available annual/semi-annual report prior to disposal 3 OPEN-ENDED FUNDS IN LIQUIDATION THE INVESTOR'S VIEW FEBRUARY 2015

4 Are the funds selling fast enough to complete the li qui dation process within the specified period (SALES-RATE-FACTOR)? The SALES-RATE-FACTOR was developed by KanAm Grund REAM to assess whether the funds are currently selling sufficient real estate assets every month, or whether they will have to increase their sales volume per month to meet the deadline of their termination period. With a SALES-RATE-FACTOR of 1, the fund is exactly on schedule with regards to the termination period, whereas a value of less than 1 indicates that the fund is selling properties at a faster rate, and a value of greater than 1 means that the fund will have to increase its monthly sales volume to the multiple of the SALES-RATE-FACTOR in order to sell all of its properties within the remaining termination period. The SALES-RATE-FACTOR of the 10 open-ended real estate funds that were analyzed and have not yet been transferred to the depositary ranges from 0.3 to 4.5. The average SALES-RATE- FACTOR of these open-ended real estate funds in liquidation is 1.8. At present, the best performer among all open-ended real estate funds for private investors is KanAm grundinvest Fonds with a SALES-RATE-FACTOR of 1.1 and for institutional investors SEB ImmoPortfolio Target Return Fund and SEB Global Property Fund with a SALES-RATE- FACTOR of Best SALES-RATE-FACTOR among open-ended real estate funds for private investors The weakest performer among all open-ended real estate funds for private investors is SEB ImmoInvest with a SALES-RATE-FACTOR of 2.8 and CS PROPERTY DYNAMIC for institutional investors with a SALES-RATE-FACTOR of 4.5. To what extent are the funds burdened by loan commitments? 6 of the 8 open-ended real estate funds that have already been transferred to the depositary have repaid all of their loans and no longer have any debt financing at this time. These funds are: KanAm US-grundinvest Fonds, HANSAimmobilia, DEGI EUROPA, Morgan Stanley P2 Value DEGI GLOBAL BUSINESS and DEGI INTERNATIONAL. Only TMW Immobilien Weltfonds and AXA Immoselect still have loan liabilities amounting to 20.2% and 6.3% respectively. 0.0 % Lowest debt ratio The lowest debt ratios among the open-ended real estate funds for private investors that have not yet been transferred to the depositary are found at CS EUROREAL with 5.5 % and among institutional funds at DEGI GERMAN BUSINESS and AXA Immosolutions with 0.0 %. The highest debt ratios among the open-ended real estate funds for private investors are found at SEB ImmoInvest with 27.2 % and among institutional funds at CS PROPERTY DYNAMIC with 44.8 %. Which fund has paid back the most to investors? Total fund assets of all open-ended real estate funds in liquidation totalled EUR 26 billion at the start of liquidation. As of the cut-off date for the study on 15 February 2015, the open-ended real estate funds in liquidation paid out a total of EUR 10.0 billion in fund assets to investors. EUR 2.2 billion Highest payout volume 4 OPEN-ENDED FUNDS IN LIQUIDATION THE INVESTOR'S VIEW FEBRUARY 2015

5 Measured by volume, CS EUROREAL an open-ended real estate fund for private investors has paid out the most to investors since the start of the liquidation period, namely EUR 2.2 billion. Among institutional funds, DEGI GERMAN BUSINESS paid out the highest volume (EUR million). Since the start of the liquidation period, UBS (D) 3 Sector Real Estate Europe made the lowest payouts in terms of volume (EUR 35.6 million) among open-ended real estate funds for private investors; and among open-ended real estate funds for institutional investors, CS PROPERTY DYNAMIC made the lowest payouts in terms of volume (EUR 1.1 million). Among the open-ended real estate funds for private investors, HANSAimmobilia and KanAm US-grundinvest Fonds have the highest payout ratios measured by proportion of fund assets, at 97.6 % and 84.7 %, respectively. Among institutional funds, DEGI GERMAN BUSINESS with 64.6 % shows the highest payout ratio measured by proportion of fund assets. Since liquidation began, the lowest payout ratios in relation to the proportion of fund assets made by the open-ended real estate funds for private investors was UBS (D) 3 Sector Real Estate Europe (10.6%) and for institutional funds, CS PROPERTY DYNAMIC (0.4%) % Highest payout ratio What has been the individual investment performance of the open-ended real estate funds in liquidation to date? Individual investment performance depends on the average investment period. In the case of open-ended real estate funds, it is assumed that for a typical investor this period will range from 5 to 8 years. A calculation of the individual investment performance of open-ended real estate funds in liquidation must also take into account the period in which investors were unable to exit the investment, i.e. since the last respective suspension date of unit redemption. Of the 18 studied open-ended real estate funds in liquidation, 8 generated a positive, while 10 featured a negative individual investment performance. The results of this study show that almost half of the funds generated a positive individual investment performance ranging from 3.1 % in the case of HANSAimmobilia to 30.2 % for the SEB ImmoPortfolio Target Return Fund. Of the funds with negative results, performance ranges from 3.3 % at UBS (D) 3 Sector Real Estate Europe to 51.5 % at DEGI GLOBAL BUSINESS. 8 Openended real estate funds with a positive individual investment performance Since the individual investment performance of a typical investor in each fund considers a different investment period, the average per-annum-(p.a.-)value of the individual investment performance of a typical investor was determined in this study for each open-ended real estate fund in order to make the fund results more comparable. The best result among the open-ended real estate funds for private investors was KanAm US-grundinvest Fonds with an average individual investment performance of 1.9 % p.a. and among the institutional funds, the SEB ImmoPortfolio Target Return Fund with 3.5 % p.a. The weakest result among the open-ended real estate funds for private investors was by Morgan Stanley P2 Value with an average individual investment performance of 6.7 % p.a. and among the institutional funds, the DEGI GLOBAL BUSINESS with 7.5 % p.a. 1.9 % p.a. Best result among open-ended real estate funds for private investors 5 OPEN-ENDED FUNDS IN LIQUIDATION THE INVESTOR'S VIEW FEBRUARY 2015

6 FIGURE 1 SCHEDULE OF OPEN-ENDED FUNDS IN LIQUIDATION OPEN-ENDED FUNDS IN LIQUIDATION Start of liquidation Termination Date Transferred to depositary Months passed 3 Months remaining 3 KanAm US-grundinvest Fonds Sep. 10 Mar. 12 Yes 18 0 HANSAimmobilia Oct. 12 Apr. 13 Yes 6 0 DEGI EUROPA Oct. 10 Sep. 13 Yes 35 0 Morgan Stanley P2 Value Oct. 10 Sep. 13 Yes 35 0 TMW Immobilien Weltfonds May 11 May 14 Yes 36 0 DEGI INTERNATIONAL Oct. 11 Oct. 14 Yes 36 0 AXA Immoselect Oct. 11 Oct. 14 Yes 36 0 UBS (D) 3 Sector Real Estate Europe Sep. 12 Sep. 15 No 29 7 KanAm grundinvest Fonds Feb. 12 Dec. 16 No SEB ImmoInvest May 12 Apr. 17 No CS EUROREAL May 12 Apr. 17 No OPEN-ENDED FUNDS for private investors 1 DEGI GLOBAL BUSINESS Aug. 11 Jun. 14 Yes 34 0 AXA Immosolutions May 12 May 15 No 33 3 DEGI GERMAN BUSINESS Nov. 12 Nov. 15 No 27 9 SEB Global Property Fund Dec. 13 Dec. 16 No KanAm SPEZIAL grundinvest Fonds Dec. 13 Dec. 16 No CS PROPERTY DYNAMIC Mar. 14 Dec. 16 No SEB ImmoPortfolio Target Return Fund Jun. 14 May 17 No OPEN-ENDED FUNDS for institutional investors 2 Source: Publications of the real estate investment companies. Calculations based on information from real estate investment company's publications. A total of 18 open-ended real estate funds have been placed in liquidation since September The termination periods of 8 open-ended real estate funds have already expired and have been transferred to the depositary. 10 open-ended real estate funds have a termination period expiring from May 2015 to May The last 2 columns of Figure 1 show how many months of the termination period have already passed for each fund, and how many months remain until the end of the termination period. Therefore, as of 15 February 2015, CS EUROREAL is 33 months into liquidation, and has another 26 months to liquidate until its termination period expires in April Marketed to the public 2 Not marketed to the public 3 The calculation is based on a key date Analysis as of: 15/02/ OPEN-ENDED FUNDS IN LIQUIDATION THE INVESTOR'S VIEW FEBRUARY 2015

7 II. INTRODUCTION During the past 4.5 years, a total of 18 open-ended real estate funds with a total worldwide portfolio volume worth EUR 33 billion have been terminated by 10 real estate investment companies. The sustainable continuation of many of these funds was made impossible in view of the high redemption volumes of the investors during and after the financial market crisis. All attempts of regaining the trust of investors failed due to the availability of open-ended real estate funds on each trading day, which served to expose the vulnerability of this product like an Achilles heel until the legislative amendment of July The investment companies of these funds are now tasked with winding down entire real estate portfolios during their typically 3-to-5 year termination periods by selling the properties, repaying the bank loans and finally, paying out the remaining capital to investors at regular intervals. The termination periods of 8 funds have already expired, 3 are due to expire this year, and the others still have some time remaining. However, all open-ended real estate funds in liquidation should sell the remainder of their real estate assets at the latest by May After publishing the study about open-ended real estate funds in liquidation from the investors view in September 2014 for the first time, KanAm Grund REAM is now updating the analysis of the liquidation in February 2015 with the following questions: How much have open-ended real estate funds in liquidation sold, and how many disposals are still outstanding? Are the funds selling fast enough to complete the liquidation process within the specified time period (SALES-RATE-FACTOR)? To what extent are the funds burdened by loan commitments? Which fund has paid back the most to investors? What has been the individual investment performance of the open-ended real estate funds in liquidation to date? With the introduction of the German Investment Code (KAGB) in July 2013, legislators abolished share redemptions on each trading day, and, synchronized the redemption period for shares for the duration of real estate disposals. With this reform, legislators helped open the door to a new future for open-ended real estate funds after more than 50 years. With a 12-month ter mination period and a 24-month holding period, the KAGB makes open-ended real estate funds significantly more shock-resistant and thus a safer and more attractive investment option for investors even in periods of crisis. The press quickly picked up on these developments and has been giving them a positive report since the summer of Investor confidence in open-ended real estate funds has also returned. Following a short period of inactive fund movements, fund companies have seen renewed increases in customer investments since the beginning of OPEN-ENDED FUNDS IN LIQUIDATION THE INVESTOR'S VIEW FEBRUARY 2015

8 REAM SALES-RATE-FACTOR provides information about the disposal speed of open-ended real estate funds in liquidation MESSETUR M / FRAN K FURT In 2013, KanAm Grund Kapitalverwaltungsgesellschaft mbh was the first company to make use of the new KAGB legislation by launching LEADING CITIES INVEST, the first open-ended real estate fund for retail investors under the new law. On 1 October 2014, a second company, RREEF, launched the sale under the new law of fund shares for grundbesitz Fokus Deutschland, also an open-ended real estate fund for retail investors. The new statutory protection rules apply to all investors in these two funds. As the first step of this study, we addressed the question of how actively open-ended real estate funds are liquidating their portfolios. To this end, we examined both the value and number of disposals. We also performed a qualitative assessment of the speed of the disposals. For this purpose, KanAm Grund REAM developed the SALES-RATE-FACTOR, a measurement value that expresses whether the fund's speed of disposal is fast enough to achieve a timely li quidation during the specified termination period. In this context, the value of the real estate assets that are sold is of most importance rather than the quantity of properties sold. For instance, the sale of a property valued at EUR 200 million would be much more difficult to sell as compared to the sale of a EUR 20 million property. 8 OPEN-ENDED FUNDS IN LIQUIDATION THE INVESTOR'S VIEW FEBRUARY 2015

9 For the next step, we examined the level of the open-ended real estate funds' loan obligations in terms of debt ratios. Some of the properties were financed with debt capital, which must be paid back to the financing banks. In general, the funds will first try to repay their loans. Once the loans have been repaid, or mostly repaid, can investors expect to receive relatively higher payouts of their invested capital. Subsequently, we took a look at the payouts of invested equity capital to investors to date. How much of the original fund assets have already been paid out to the investors? In this context, the payout ratio at the end of the termination period will be more important to most investors than the speed with which the payments are made. In other words: From the viewpoint of investors, the preservation of assets through intelligent sales strategies usually takes precedence over fast disposals with potential losses. Comparisons of open-ended real estate funds on the basis of payouts to investors are therefore of only limited value. On one hand, funds will be in the process of liquidation and payout for different lengths of time, since they were terminated at different times. On the other hand, a fund that prioritizes its contractual obligations vis-à-vis the financing banks over payouts to investors because the repayment of debt should simplify the disposal of the remaining properties should be viewed in a more positive light from a long-term standpoint. This study aims to examine open-ended real estate funds in liquidation not from the viewpoint of an analyst, but rather from that of an investor. Current studies generally use the date of suspension of unit redemption or liquidation of open-ended real estate funds as a starting point for analysis. However, the individual investment performance of an investor will depend on his investment horizon, which generally begins long before the suspension of unit redemption or liquidation of the open-ended real estate fund. For this reason, the last section of our study takes a look at the individual investment performance of a typical investor who is invested in the respective open-ended real estate fund for an average of 5 years before the suspension of unit redemption. The results show that investors in 8 out of 18 open-ended real estate funds are still achieving a positive result. 65 CROISETTE / CANNES 9 OPEN-ENDED FUNDS IN LIQUIDATION THE INVESTOR'S VIEW FEBRUARY 2015

10 III. DISPOSALS / SALES-RATE-FACTOR At the start of the liquidation process, the real estate assets of all 18 openended real estate funds in liquidation were EUR 33 billion in over 649 properties. By the cut-off date for the study, 15 February 2015, the open-ended real estate funds in liquidation had sold a total of EUR 17.5 billion in real estate assets 1, or 355 properties. Measured by market value volume, KanAm grundinvest Fonds an open-ended real estate fund for private investors sold the most at EUR 3.6 billion. Among the open-ended real estate funds for institutional investors, SEB ImmoPortfolio Target Return Fund achieved the highest sales volume at EUR 676 million. In the case of open-ended real estate funds for private investors which have not yet sold all of the real estate assets, the UBS (D) 3 Sector Real Estate Europe has the lowest sales volume at EUR 272 million relative to its smaller fund size. CS PROPERTY DYNAMIC an institutional fund has a sales volume of EUR 41 million by the study's cut-off date of 15 February Over three quarters of the remaining real estate assets totalling EUR 12.5 billion are divided between 3 funds: SEB ImmoInvest with EUR 4.3 billion, CS EUROREAL with EUR 3.2 billion and KanAm grundinvest Fonds with EUR 2.4 billion. These funds have until April 2017, or for KanAm grundinvest Fonds, December 2016, to dispose of their real estate portfolios. KanAm US-grundinvest Fonds was the only fund that sold all of its properties before the end of its termination period. HANSAimmobilia is a special case in that it sold all of its properties to a special fund beloning to the company. 6 open-ended real estate funds, Morgan Stanley P2 Value, DEGI EUROPA, TMW Immobilien Weltfonds, DEGI GLOBAL BUSINESS, DEGI INTERNATIONAL and AXA Immoselect, were not able to sell all properties before their termination period ended. Subsequently, their remaining property portfolios were transferred to their depositary: Morgan Stanley P2 Value as of 1 October 2013 with 5 properties (EUR million) DEGI EUROPA as of 1 October 2013 with 7 properties (EUR million) TMW Immobilien Weltfonds as of 1 June 2014 with 5 properties (EUR million) DEGI GLOBAL BUSINESS as of 1 July 2014 with 2 properties (EUR 23.3 million) DEGI INTERNATIONAL as of 16 October 2014 with 5 properties (EUR million) AXA Immoselect as of 21 October 2014 with 9 properties (EUR million) As this process results in a change of ownership of the properties, real estate transfer taxes can be incurred. This could negatively affect investors in terms of investment performance and possible delays in payouts of invested capital. Following the transfer of the 6 funds to the depositary, 1 Market value volume according to property records reported in the most recent available annual/ semi-annual report prior to disposal 10 OPEN-ENDED FUNDS IN LIQUIDATION THE INVESTOR'S VIEW FEBRUARY 2015

11 the respective investment companies were tasked with selling the remaining properties. In the meantime, 3 funds were able to sell further properties by the study's cut-off date of 15 February These are Morgan Stanley P2 Value with 4 real estate disposals, DEGI EUROPA with 2 real estate disposals and TMW Immobilien Weltfonds with 1 real estate disposal. For the remaining funds, DEGI GLOBAL BUSINESS, DEGI INTERNATIONAL and AXA Immoselect, no information about further sales was available after their transfer to the depositary. The termination period for 1 open-ended real estate fund for private investors (UBS (D) 3 Sector Real Estate Europe) will expire in September Among the open-ended real estate funds for institutional investors, the termination period for 2 funds will expire in 2015: for AXA Immosolutions in May 2015 and for DEGI GERMAN BUSINESS in November UBS (D) 3 Sector Real Estate Europe has a remaining property portfolio of EUR 132 million, consisting of 11 properties. AXA Immosolutions and DEGI GERMAN BUSINESS have a remaining property port folio of EUR 42 million, consisting of 3 properties and EUR 36 million, consisting of 6 properties respectively. The funds must sell all properties by the end of the termination period, or the properties will be transferred to the respective depositary. This could result in additional costs for the fund in the form of real-estate transfer taxes, with the corresponding disadvantages for investors MAIN / HOUSTON 11 OPEN-ENDED FUNDS IN LIQUIDATION THE INVESTOR'S VIEW FEBRUARY 2015

12 FIGURE 2 SOLD MARKET VALUE VOLUME 5 OF OPEN-ENDED FUNDS IN LIQUIDATION OPEN-ENDED FUNDS IN LIQUIDATION Properties sold 3 since start of liquidation Current real estate assets 4 sales volume in EUR million 5 as % of real number number in EUR million estate assets 6 KanAm grundinvest Fonds 3, ,391 AXA Immoselect 2, CS EUROREAL 1, ,162 SEB ImmoInvest 1, ,303 DEGI INTERNATIONAL 1, DEGI EUROPA 1, Morgan Stanley P2 Value 1, TMW Immobilien Weltfonds KanAm US-grundinvest Fonds USD 346 million HANSAimmobilia UBS (D) 3 Sector Real Estate Europe OPEN-ENDED FUNDS for private investors 1 15,593 Ø = ,829 SEB ImmoPortfolio Target Return Fund SEB Global Property Fund DEGI GLOBAL BUSINESS DEGI GERMAN BUSINESS AXA Immosolutions KanAm SPEZIAL grundinvest Fonds CS PROPERTY DYNAMIC OPEN-ENDED FUNDS for institutional investors 2 1,860 Ø = ,632 Source: Currently available publications of the real estate investment companies and depositaries. Publication by Angermann Real Estate Advisory AG. Calculations based on the real estate investment company's and depositary s publications. 1 Marketed to the public 2 Not marketed to the public 3 All transferred and sales contract secured real estate disposals by the cut-off date of 15 February 2015 are taken into consideration. 4 Calculated on the basis of the latest published information of the real estate investment companies 5 Market value volume according to property records reported in the most recent available annual/semi-annual report prior to disposal 6 The latest published information about the real estate assets prior to start of liquidation Ø = Weighted average Analysis as of: 15/02/ OPEN-ENDED FUNDS IN LIQUIDATION THE INVESTOR'S VIEW FEBRUARY 2015

13 SALES-RATE-FACTOR of open-ended real estate funds in liquidation The open-ended real estate funds in liquidation generally sell their entire real estate portfolio over a period of 3-to-5 years, depending on the length of the termination period. As part of this study, a SALES-RATE-FACTOR was calculated for each open-ended real estate fund in order to assess the speed of the disposals. This factor shows whether the funds are currently selling sufficient real estate assets every month, or whether they will have to increase the sales volume per month until the end of the termination period. By definition, the SALES-RATE-FACTOR is the ratio between the average required monthly sales volume during the remaining termination period and the monthly average of real estate assets that have been sold during the termination period that has already passed. SALES-RATE-FACTOR Average required monthly sales volume during the remaining termination period Real estate assets already sold per month on average during the termination period that has passed Example: KanAm grundinvest Fonds As of 15 February 2015, KanAm grundinvest Fonds had sold EUR 101 million of real estate assets per month on average during the 36 months of the termination period that has already passed. Given a remaining real estate portfolio of EUR 2.4 billion, the fund must sell EUR 109 million of assets per month on average during the remaining 22 months of the termination period. If we divide the required future monthly sales volume of EUR 109 million by the already sold monthly sales volume of EUR 101 million, we arrive at a SALES-RATE-FACTOR of 1.1. This means that the speed of disposals at KanAm grundinvest Fonds is almost exactly aligned to the termination period. 13 OPEN-ENDED FUNDS IN LIQUIDATION THE INVESTOR'S VIEW FEBRUARY 2015

14 SALES-RATE-FACTOR results as of 15 February 2015 Of the total 18 open-ended real estate funds in liquidation, 8 have already been transferred to the depositary and are therefore not considered in the calculation of the SALES-RATE- FACTOR. The study covered the 10 open-ended real estate funds that have not yet been transferred to the depositary. The SALES-RATE-FACTOR of the 10 open-ended real estate funds that were analyzed ranges from 0.3 to 4.5. The average SALES-RATE-FACTOR of the funds is 1.8. At present, KanAm grundinvest Fonds has achieved the best result among all open-ended real estate funds for private investors with a SALES-RATE-FACTOR of 1.1. If this fund slightly increases its present rate of disposals, it will be able to sell its entire real estate portfolio by the end of the termination period. At present, SEB ImmoPortfolio Target Return Fund and SEB Global Property Fund have achieved the best result among all open-ended real estate funds for institutional investors with a SALES-RATE-FACTOR of 0.3. If the funds maintain this rate of disposal, they will be able to sell their entire real estate portfolios well before the end of the termination period. The weakest performer among all open-ended real estate funds for private investors is SEB ImmoInvest with a SALES-RATE-FACTOR of 2.8. This fund would have to increase its current monthly sales volume to the 2.8-fold until the end of termination period in April 2017 in order to sell all properties within the termination period. The weakest performer among all open-ended real estate funds for institutional investors is CS PROPERTY DYNAMIC with a SALES-RATE-FACTOR of 4.5. This fund would have to increase its monthly sales volume to the 4.5-fold until the end of termination period in order to sell all properties within the time allotted. The termination period for this fund expires December OPEN-ENDED FUNDS IN LIQUIDATION THE INVESTOR'S VIEW FEBRUARY 2015

15 FIGURE 3 CALCULATION OF SALES-RATE-FACTOR FOR OPEN-ENDED FUNDS IN LIQUIDATION RANKING OPEN-ENDED FUNDS IN LIQUIDATION Start of liquidation Termination Date Months Months passed 6 remaining 6 Sales volume 2 to date in EUR million Current real estate assets 1 in EUR million Average sales volume per month to date in EUR million Average required sales volume per month to end of period in EUR million SALES- RATE- FACTOR 5 1 KanAm grundinvest Fonds Feb. 12 Dec ,640 2, CS EUROREAL May 12 Apr ,979 3, UBS (D) 3 Sector Real Estate Europe Sep. 12 Sep SEB ImmoInvest May 12 Apr ,870 4, OPEN-ENDED FUNDS for private investors 3 Ø = 33 Ø = 21 7,761 9,988 Ø = 57 Ø = 102 Ø = SEB ImmoPortfolio Target Return Fund Jun. 14 May SEB Global Property Fund Dec. 13 Dec DEGI GERMAN BUSINESS Nov. 12 Nov AXA Immosolutions May 12 May KanAm SPEZIAL grundinvest Fonds Dec. 13 Dec CS PROPERTY DYNAMIC Mar. 14 Dec OPEN-ENDED FUNDS for institutional investors 4 Ø = 18 Ø = 18 1,588 1,609 Ø = 22 Ø = 13 Ø = 1.7 Source: Currently available publications of the real estate investment companies and depositaries. Publication by Angermann Real Estate Advisory AG. Calculations based on information from real estate investment company's and depositary s publications. Ø = Average Analysis as of: 15/02/2015 Figure 3 shows the SALES-RATE-FACTOR for all of the open-ended real estate funds currently in liquidation, which have already begun to sell their properties and have not yet been transferred to the depositary. A distinction is made between open-ended real estate funds for private investors and for institutional investors. 1 Calculated on the basis of the latest published information of the real estate investment companies and depositaries 2 Market value volume according to property records reported in the most recent available annual/ semi-annual report prior to disposal 3 Marketed to the public 4 Not marketed to the public 5 By definition, the SALES-RATE-FACTOR is the ratio between the average required monthly sales volume during the remaining termination period and the monthly average of real estate assets that have been sold during the termination period that has already passed. 6 The calculation is based on a key date 15 OPEN-ENDED FUNDS IN LIQUIDATION THE INVESTOR'S VIEW FEBRUARY 2015

16 REAM IV. REPAYMENT OF LOANS Some properties of the open-ended real estate funds in liquidation were financed with debt capital. The contractually agreed repayment of the loans are fixed, and therefore, take legal priority over payouts to investors. The following Figure 4 shows the level of the funds' current liabilities vis-à-vis the banks, measured by the proportion of the real estate assets that are currently financed with debt capital. DEGI GERMAN BUSINESS, AXA Immosolutions and 6 of the 8 open-ended real estate funds, that have already been transferred to the depositary have repaid all of their loans and no longer have any debt financing at this time. These funds are: KanAm US-grundinvest Fonds, HANSAimmobilia, DEGI EUROPA, Morgan Stanley P2 Value, DEGI GLOBAL BUSINESS and DEGI INTERNATIONAL. 2 of the 8 open-ended real estate funds that have been transferred to the depositary still have loan liabilities amounting to 20.2% for TMW Immobilien Weltfonds and 6.3% for AXA Immoselect. The lowest debt ratio among the open-ended real estate funds for private investors that have not yet been transferred to the depositary are found at CS EUROREAL with 5.5 % and among institutional funds at DEGI GERMAN BUSINESS and AXA Immosolutions with 0.0 % respectively. The highest debt ratios among the open-ended real estate funds for private investors are found at SEB ImmoInvest with 27.2 % and among institutional funds at CS PROPERTY DYNAMIC with 44.8 %. E-COMMER CE / M O N TRÉAL 16 OPEN-ENDED FUNDS IN LIQUIDATION THE INVESTOR'S VIEW FEBRUARY 2015

17 FIGURE 4: CURRENT DEBT RATIO OF OPEN-ENDED FUNDS IN LIQUIDATION in % ,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0 KanAm US-grundinvest Fonds HANSAimmobilia DEGI EUROPA Morgan Stanley P2 Value DEGI GLOBAL BUSINESS DEGI GERMAN BUSINESS DEGI INTERNATIONAL AXA Immosolutions CS EUROREAL AXA Immoselect UBS (D) 3 Sector Real Estate Europe KanAm grundinvest Fonds KanAm SPEZIAL grundinvest Fonds TMW Immobilien Weltfonds SEB ImmoInvest SEB Global Property Fund SEB ImmoPortfolio Target Return Fund CS PROPERTY DYNAMIC Open-ended real estate funds, which have already been transferred to the depositary Open-ended real estate funds for private investors 1 Open-ended real estate funds for institutional investors 2 Source: Currently available publications of the real estate investment companies and depositaries 1 Marketed to the public 2 Not marketed to the public Analysis as of: 15/02/ OPEN-ENDED FUNDS IN LIQUIDATION THE INVESTOR'S VIEW FEBRUARY 2015

18 V. PAYOUTS Open-ended real estate funds in liquidation are supposed to pay out a portion of the sales proceeds to investors in the form of payouts on a regular basis. The total fund assets of all 18 open-ended real estate funds in liquidation totalled EUR 26 billion at the start of liquidation. As of the cutoff date for the study (15 February 2015), the open-ended real estate funds in liquidation paid out a total of EUR 10.0 billion in fund assets to investors. Measured by volume, CS EUROREAL an open-ended real estate fund for private investors has paid out the most to investors since the start of the liquidation period, namely EUR 2.2 billion. Among institutional funds, DEGI GERMAN BUSINESS paid out the highest volume (EUR million). Since the start of the liquidation period, UBS (D) 3 Sector Real Estate Europe made the lowest payouts in terms of volume (EUR 35.6 million) among open-ended real estate funds for private investors; and among open-ended real estate funds for institutional investors, CS PROP- ERTY DYNAMIC made the lowest payouts in terms of volume (EUR 1.1 million). Among the open-ended real estate funds for private investors, HANSAimmobilia and KanAm US-grundinvest Fonds have the highest payout ratios measured by proportion of fund assets, at 97.6 % and 84.7 %, respectively. Among institutional funds, DEGI GERMAN BUSINESS with 64.6 % shows the highest payout ratio measured by proportion of fund assets. HANSAimmobilia is a special case in that it sold all of its properties to a special fund belonging to the company. The fund has been able to pay out 97.6 % of fund assets to investors since the start of liquidation. The remaining liquidity was transferred to the depositary. According to HANSAINVEST, the remaining amount can be paid out in smaller installments, which may take some time. KanAm USgrundinvest Fonds, which had in fact liquidated its complete real estate portfolio beforehand, i.e. sold it to external investors, was able to pay out 84.7 % of fund assets to investors. The remaining liquidity was transferred to the depositary and will be held there until the limitation periods for all warranty claims against the fund have expired. Morgan Stanley P2 Value, DEGI EUROPA, TMW Immobilien Weltfonds, DEGI GLOBAL BUSINESS, DEGI INTERNATIONAL and AXA Immoselect, which have also been transferred to their depositaries and did not sell all of their properties before that time, were able to pay out between 15.6% and 71.3 % of their fund assets to investors by the study's cut-off date. Since liquidation began, the lowest payout ratios in relation to the proportion of fund assets made by the open-ended real estate fund for private investors was UBS (D) 3 Sector Real Estate Europe (10.6%) and for institutional funds, CS PROPERTY DYNAMIC (0.4%). 18 OPEN-ENDED FUNDS IN LIQUIDATION THE INVESTOR'S VIEW FEBRUARY 2015

19 FIGURE 5 PAYOUTS 4 BY OPEN-ENDED FUNDS IN LIQUIDATION OPEN-ENDED FUNDS IN LIQUIDATION Start of liquidation Termination Date Months Months passed 5 remaining 5 Payouts 4 since start of liquidation number per share in EUR in EUR million as % of fund assets 1 HANSAimmobilia Oct. 12 Apr (Depositary) KanAm US-grundinvest Fonds Sep. 10 Mar (Depositary) 3 USD USD million 84.7 Morgan Stanley P2 Value Oct. 10 Sep (Depositary) DEGI INTERNATIONAL Oct. 11 Oct (Depositary) , DEGI EUROPA Oct. 10 Sep (Depositary) AXA Immoselect Oct. 11 Oct (Depositary) , CS EUROREAL May 12 Apr EUR / CHF ,182.6 EUR: 37.6 / CHF: 37.8 SEB ImmoInvest May 12 Apr , KanAm grundinvest Fonds Feb. 12 Dec TMW Immobilien Weltfonds May 11 May (Depositary) UBS (D) 3 Sector Real Estate Europe Sep. 12 Sep OPEN-ENDED FUNDS for private investors 2 9,473.6 DEGI GERMAN BUSINESS Nov. 12 Nov DEGI GLOBAL BUSINESS Aug. 11 Jun (Depositary) AXA Immosolutions May 12 May SEB ImmoPortfolio Target Return Fund Jun. 14 May SEB Global Property Fund Dec. 13 Dec KanAm SPEZIAL grundinvest Fonds Dec. 13 Dec CS PROPERTY DYNAMIC Mar. 14 Dec OPEN-ENDED FUNDS for institutional investors Source: Currently available publications of the real estate investment companies and depositaries, OnVista and ARIVA. Calculations based on information in the real estate investment company's and depositary s publications, OnVista and ARIVA. Analysis as of: 15/02/ Sum of payouts per share as % of unit price on the start date of the liquidation 2 Marketed to the public 3 Not marketed to the public 4 Prior to deduction of capital gains taxes 5 The calculation is based on a key date 19 OPEN-ENDED FUNDS IN LIQUIDATION THE INVESTOR'S VIEW FEBRUARY 2015

20 REAM KI EVI TPLEI N / AN TW ERP The payout ratio at the end of the termination period will be more important to most investors than the speed with which the payments are made. In other words: From the viewpoint of investors, the preservation of assets through intelligent sales strategies usually takes precedence over fast disposals with potential losses. Comparisons of open-ended real estate funds on the basis of payouts to investors are therefore of only limited value. On one hand, funds will be in the process of liquidation and payout for different lengths of time, since they were terminated at different times. On the other hand, a fund that prioritizes its contractual obligations vis-à-vis the financing banks over payouts to investors because the repayment of debt should simplify the disposal of the remaining properties and should be viewed in a more positive light from a long-term standpoint. 20 OPEN-ENDED FUNDS IN LIQUIDATION THE INVESTOR'S VIEW FEBRUARY 2015

21 VI. INDIVIDUAL INVESTMENT PERFORMANCE Investors generally stay invested in open-ended real estate funds for a period of 5 to 8 years. Therefore, it is not sufficient to start an analysis of open-ended real estate funds with the date on which the termination is announced. Rather, an analysis from the viewpoint of the investor must take into account the entire investment period. An example: Let us assume that, in 2005, an investor buys shares in an open-ended real estate fund and plans to sell his shares in 2010 in accordance with the average investment horizon of 5 to 8 years. However, in 2010 and before the investor plans to redeem his shares the relevant openended real estate fund announces the suspension of unit redemption. Let us further assume that after the expiration of the maximum suspension period of unit redemption in 2012, the fund announces the termination of management of the fund and the liquidation of the open-ended real estate fund without re-opening the redemption period. Thus depriving the investor of the option to redeem his shares. This would mean that currently in the year 2015 the investor has been invested in the fund for a period of exactly 10 years. Therefore, to calculate the investor's individual investment performance, it is necessary to calculate the success of the investment for the period in which the individual has been invested. For a typical investor with an average investment horizon of 5 years, this would be approximately 5 years before the last suspension of unit redemption, or approximately 7 years before the termination of the open-ended real estate funds now in liquidation (see Figure 6). This analysis uses the date of the last suspension of unit redemption since that is the time as of which the investors are no longer able to leave the funds and thus are obliged to go through the subsequent liquidation process. 21 OPEN-ENDED FUNDS IN LIQUIDATION THE INVESTOR'S VIEW FEBRUARY 2015

22 FIGURE 6 EXEMPLARY INVESTMENT CYCLE Investment period of an investor with an average investment horizon of 5 years in an open-ended real estate fund in liquidation since Investor invests in open- Investor receives annual ended real estate fund distribution Planned investment period: Unit price of the openended real estate fund 5 years (sell of shares in 2010) changes Investor receives annual Open-ended real estate distribution fund declares temporary Unit price of the openended real estate fund tion because there is not suspension of unit redemp- changes enough liquidity for the redemption request Investor receives annual distribution Unit price of the openended real estate fund changes Open-ended real estate Open-ended real estate fund is wound down and fund is wound down and some of the proceeds are some of the proceeds are paid out to investors and paid out to investors and used to repay loans used to repay loans Investor receives annual Investor receives annual distribution distribution Unit price of the openended real estate fund ended real estate Unit price of the open- fund changes 2017 changes Open-ended real estate fund is wound down and some of the proceeds are paid out to investors and used to repay loans Investor receives annual distribution Unit price of the open-ended real estate fund changes Remaining liquidity and properties (if applicable) are transferred to depositary Investor receives annual Investor receives annual distribution distribution Unit price of the openended real estate fund ended real estate fund Unit price of the open- changes changes Open-ended real estate Open-ended real estate fund maintains suspension fund is terminated with five of unit redemption because year notice period. This is there is still not enough the start of the liquidation liquidity for the redemption of the real estate portfolio request and payout of proceeds to Investor receives annual investors, as well as distribution repayment of loans Unit price of the openended real estate fund distribution Investor receives annual changes Unit price of the openended real estate fund changes Open-ended real estate fund is wound down and some of the proceeds are paid out to investors and used to repay loans Investor receives annual distribution Unit price of the openended real estate fund changes Open-ended real estate fund is wound down and some of the proceeds are paid out to investors and used to repay loans Investor receives annual distribution Unit price of the openended real estate fund changes AT THE LATEST 2020 The depositary basically has to sell all remaining assets 22 OPEN-ENDED FUNDS IN LIQUIDATION THE INVESTOR'S VIEW FEBRUARY 2015

23 Calculation of individual investment performance We analyze the investment performance of the respective open-ended real estate fund over a period of 5 years until the respective suspension date of unit redemption plus the investment performance over the period of the respective suspension date until the present. 8 out of 18 open-ended real estate funds in liquidation reach a positive result for an investor who has invested 5 years on average before the suspension of unit redemption until the study's cut-off date. CITÉ DU RETIRO / PARIS The investor's individual investment performance is of most importance because it is the only factor that fully takes into account the value growth of the investment. The individual's investment horizon and the fact that the investor could no longer exit the fund as of the suspension date of unit redemption are key factors in this context. The results of individual investment performance for the presented examination show that out of the 18 studied open-ended real estate funds in liquidation 8 generated a positive, while 10 featured a negative individual investment performance. 23 OPEN-ENDED FUNDS IN LIQUIDATION THE INVESTOR'S VIEW FEBRUARY 2015

24 FIGURE 7 INDIVIDUAL INVESTMENT PERFORMANCE OVER THE ENTIRE HOLDING PERIOD for a period of 5 years before the respective suspension of unit redemption until 15/02/2015 in % SEB ImmoPortfolio Target Return Fund KanAm US-grundinvest Fonds 2 SEB ImmoInvest CS EUROREAL A EUR KanAm grundinvest Fonds CS PROPERTY DYNAMIC KanAm SPEZIAL grundinvest Fonds HANSAimmobilia 5 UBS (D) 3 Sector Real Estate Europe SEB Global Property Fund DEGI INTERNATIONAL AXA Immosolutions 1 AXA Immoselect DEGI GERMAN BUSINESS 1 DEGI EUROPA TMW Immobilien Weltfonds 1 Morgan Stanley P2 Value 1 DEGI GLOBAL BUSINESS 1 Open-ended real estate funds for private investors 3 Open-ended real estate funds for institutional investors 4 Source: Publications of the real estate investment companies, depositaries, OnVista, DPG and ARIVA. Calculations based on information in the publications of the real estate investment companies, depositaries, OnVista, DPG and ARIVA. Calculation made according to BVI method. Because distributions cannot be reinvested in fund shares when an open-ended real estate fund is in liquidation, these distributions are taken into account as an interest-free amount when calculating value development. 1 Time period of value development beginning with date of launch, as the fund was less than 5 years old at the date of suspension of unit redemption. 2 Foreign currency fund The columns in Figure 7 show the individual investment performance over the entire holding period of an investor with an average investment horizon of 5 years in the respective open-ended real estate fund for a period of 5 years before the respective suspension of unit redemption until 15 February This shows very clearly that: approximately half of the funds generated a decidedly positive individual investment performance ranging from 3.1 % for HANSAimmobilia to 30.2 % for SEB ImmoPortfolio Target Return Fund. On the other side, DEGI EUROPA, TMW Immobilien Weltfonds, Morgan Stanley P2 Value, as well as DEGI GLOBAL BUSINESS incurred the highest real losses for investors. The unit price in these funds declined significantly in the 5 years before the respective suspension of unit redemption (or for 3 funds since the date of launch 1 ) until 15 February 2015, by as much as 51.5% in the case of DEGI GLOBAL BUSINESS. 3 Marketed to the public 4 Not marketed to the public 5 Approximate values based on the semi-annual unit price information of the depositary 24 OPEN-ENDED FUNDS IN LIQUIDATION THE INVESTOR'S VIEW FEBRUARY 2015

25 FIGURE 8 AVERAGE INDIVIDUAL INVESTMENT PERFORMANCE P.A. for a period of 5 years before the respective suspension of unit redemption until 15/02/2015 in % SEB ImmoPortfolio Target Return Fund KanAm US-grundinvest Fonds 2 SEB ImmoInvest CS PROPERTY DYNAMIC KanAm grundinvest Fonds CS EUROREAL A EUR KanAm SPEZIAL grundinvest Fonds HANSAimmobilia 5 UBS (D) 3 Sector Real Estate Europe DEGI INTERNATIONAL SEB Global Property Fund AXA Immoselect AXA Immosolutions 1 DEGI GERMAN BUSINESS 1 DEGI EUROPA TMW Immobilien Weltfonds 1 Morgan Stanley P2 Value 1 DEGI GLOBAL BUSINESS 1 Open-ended real estate funds for private investors 3 Open-ended real estate funds for institutional investors 4 Source: Publications of the real estate investment companies, depositaries, OnVista, DPG and ARIVA. Calculations based on information in the publications of the real estate investment companies, depositaries, OnVista, DPG and ARIVA. Calculation made according to BVI method. Because distributions cannot be reinvested in fund shares when an open-ended real estate fund is in liquidation, these distributions are taken into account as an interest-free amount when calculating value development. 1 Time period of value development beginning with date of launch, as the fund was less than 5 years old at the date of suspension of unit redemption. 2 Foreign currency fund The columns in Figure 8 show the average individual investment performance p.a. in each openended real estate fund for a period of 5 years before the respective suspension of unit redemption until 15 February The best result among the open-ended real estate funds for private investors was achieved by the KanAm US-grundinvest Fonds with an average individual investment performance of 1.9 % p.a. and among the institutional funds by the SEB ImmoPortfolio Target Return Fund with 3.5 % p.a. The weakest result among the open-ended real estate funds for private investors shows the Morgan Stanley P2 Value with an average individual investment performance of 6.7 % p.a. and among the institutional funds the DEGI GLOBAL BUSINESS with 7.5 % p.a. In principle, this information could be used to determine the average of the performance offered by the 18 open-ended real estate funds. But this average value is rather insignificant, as an investor is not invested in all open-ended real estate funds. 3 Marketed to the public 4 Not marketed to the public 5 Approximate values based on the semi-annual unit price information of the depositary 25 OPEN-ENDED FUNDS IN LIQUIDATION THE INVESTOR'S VIEW FEBRUARY 2015

26 VII. CONTACT FOR QUESTIONS AND SUGGESTIONS PUBLISHER KanAm Grund Real Estate Asset Management GmbH & Co. KG MesseTurm Frankfurt am Main EDITORIAL TEAM / AUTHORS Helena Ivanovic Director Economics Department / Research Elif Arul Senior Analyst Economics Department / Research Thomas Kotyrba Senior Analyst Economics Department / Research CONTACT Economics Department / Research [email protected] 26 OPEN-ENDED FUNDS IN LIQUIDATION THE INVESTOR'S VIEW FEBRUARY 2015

27 DISCLAIMER This is promotional material and does not constitute investment advice. This information is provided to you by KanAm Grund Real Estate Asset Management GmbH & Co. KG. The statements, analyses, forecasts and concepts contained in this report are intended solely for your non-binding information. No liability can be assumed for the accuracy or completeness of the information provided. This report does not constitute tax, legal or other advice and does not form the basis for the administration of assets or recommendation/advice for asset allocation. This report should be treated confidentially and may not be used without the prior written consent of KanAm Grund Real Estate Asset Management GmbH & Co. KG. Cut-off date for the study: 15 February 2015 OPEN-ENDED FUNDS IN LIQUIDATION THE INVESTOR'S VIEW FEBRUARY 2015

28 REAM MesseTurm Frankfurt am Main T + 49 (69) F + 49 (69) / KanAm Grund Real Estate Asset Management GmbH & Co. KG