The opening line of the Charles Dickens’ novel A Tale of Two Cities, “It was the best of times, it was the worst of times”, aptly describes the state of Germany’s property investment market. Times could not be worse for German banks active in that market. Open-ended property funds – the banks’ premier real estate product with €88bn in total assets – are in crisis for the first time since their launch in 1959.
In December, Deutsche Bank’s DB Real Estate took the unprecedented step of closing its €6.1bn German fund temporarily following a wave of panic-selling by the fund’s investors. In 2004, market leader DekaBank was forced to restructure its €5bn German fund after investors withdrew €2.4bn out from it. The events have badly shaken the public’s confidence in the asset class, reflected in the €3bn in investor outflows in December.
