German property funds propose 1-yr holding period

* Proposes 12-mth holding period for new investors

* Institutional investors need 12-mth notice to sell

LONDON, May 14 (BestGrowthStock) – An industry group for German
open-ended real estate funds has proposed a 12-month holding
period for all new investors, and imposing a notice period of
the same length for institutional investors that wish to sell.

German open-ended funds, influential in global property
markets with about 80 billion euros ($102 billion) in assets,
have struggled since the downturn to cope with investor demands
to withdraw their cash, forcing many to freeze redemptions.

“This holding period for new investors highlights the
fact that property is a long-term investment,” said Stefan Seip,
director general of the German Investment and Asset Management
Association (BVI) in a statement on Friday.

Earlier this week, Morgan Stanley (MS.N: ) (Read more about the money market today. ) became the latest
bank to freeze its German open real estate fund, prompted by
steep declines in property values and as the government mulls a
regulatory clampdown on the sector. [ID:nLDE6490VI]

Other major financial firms managing German property funds
to have frozen redemptions in recent years include Switzerland’s
UBS (UBSN.VX: ), Sweden’s SEB (SEBa.ST: ) and France’s AXA
(AXAF.PA: ).

A German finance ministry discussion paper on proposed
changes to rectify the problems would require investors to hold
funds for at least two years and would force them to accept an
equally long cancellation period.

The BVI said it is currently in talks with relevant parties
on the proposed changes to the property funds.

To maintain the attraction of these funds as part of
retirement planning, BVI said its members have also agreed not
to impose restrictions on investments for retirement, even when
redemptions are suspended.

“To further boost investor confidence in the product, the
industry is suggesting valuation of properties by
independent experts every six months, instead of the
current yearly intervals,” it said.

Currently, German real estate funds usually use their own
appraisers when determining the value of properties in their
portfolio, values that are dependent on the development of sales
and rental on the property market.

Stock Investing
(Reporting by Daryl Loo, Editing by Mark Potter)

($1=.7872 Euro)
(See for the global service for real
estate professionals from Reuters)

German property funds propose 1-yr holding period