German real estate funds are liquidating
Background: This investment is not an original idea, but rather a “me too” investment.
Ben from Wertart has a very good write up from November last year, so I spare myself to go into too much historic description.
The study shows that of the original €33bn in liquidation, the 18 funds have collectively sold about €19bn of their assets, or 355 individual properties, and have paid out €11.6bn to their erstwhile investors.
What we know is that they plan to distribute a “significant amount” in the second quarter of 2017 and then have 5 years time to fully liquidate.
Potential returns Assuming roughly Wertart’s cashflow distribution I would end up with the following cash flow profile and IRR: Is this attractive ? and a relatively short duration (~50% of the investment might come back within a few months), it looks to me very attractive on a risk adjusted basis.
As of December 31st 2016, the fund has sold 95% of its real estate and is now effectively a cash box with some remaining real estate exposure.
So let’s focus on what has changed since Ben wrote his post: The biggest buffer against this are the provisions, which should cover anything related with regard to taxes and guarantees etc.