Investors in the Real Estate Fund Face Financial Losses
The closed-end real estate fund dii. Wohnimmobilien Deutschland 1 GmbH & Co. Geschlossene Investment-KG is set to be liquidated. This was communicated to investors by Paribus Kapitalverwaltungsgesellschaft in a letter dated January 9, 2025. For investors in this public fund, the liquidation means they must brace themselves for financial losses.
The liquidation of the closed-end real estate fund dii. Wohnimmobilien Deutschland 1 follows the insolvency of d.i.i. Deutsche Invest Immobilien AG in March 2024. The asset manager Paribus took over the administration of several real estate funds from the d.i.i. group after the insolvency. However, Paribus Kapitalverwaltungsgesellschaft appears to see no economically viable future for dii. Wohnimmobilien Deutschland 1 and now plans the “silent liquidation” of the fund.
Fund Properties to Be Sold
Subject to the approval of the banks, the fund properties are to be sold. For investors, this likely means financial losses. Paribus has stated that real estate prices have significantly decreased since the acquisition of the fund properties. Furthermore, the proceeds from the sales will first be used to settle liabilities with the banks. Only if there is a surplus after deducting all other costs might there be a distribution to the investors. Conversely, the fund company may need to file for insolvency if the sale proceeds are insufficient to cover its liabilities and costs.
Given these grim prospects, investors should explore their legal options to protect themselves from impending financial losses. According to the economic law firm MTR Legal Rechtsanwälte, pursuing compensation claims may be an option. The firm has extensive experience in capital markets law and representing investor interests.
Falling Real Estate Prices, Rising Interest Rates
The real estate fund dii. Wohnimmobilien Deutschland 1 was launched in 2020 as a closed-end public AIF. Private investors could participate with a minimum investment of €20,000. In total, investors contributed approximately €12 million.
The fund company invested in four properties located in Hamburg, Nuremberg, and Troisdorf. Bank loans were also taken out to partially finance these investments. Unfortunately, the fund did not develop as anticipated. Contributing factors included falling real estate prices and sharply rising interest rates. According to Paribus’ communication to investors, these challenges eroded the fund’s liquidity and prevented necessary modernization and maintenance work on the properties. Consequently, planned rent increases could not be implemented.
No Economically Viable Solution Found
Paribus explored various options for continuing the dii. Wohnimmobilien Deutschland 1 fund. However, no economically viable solution could be found. As a result, the “silent liquidation” involving the sale of fund properties is now planned. This, however, depends on the cooperation of the banks, as noted in the communication.
In addition to dii Wohnimmobilien Deutschland 1, the d.i.i. group also launched dii Wohnimmobilien Deutschland 2 as a closed-end public fund. In this case, insolvency proceedings were initiated against the fund company in October 2024. Similarly, investors in this fund have faced disappointment, with no substantial returns and the prospect of significant financial losses instead.
Investor Compensation Claims
To mitigate their losses, investors in the closed-end funds dii Wohnimmobilien Deutschland 1 and dii Wohnimmobilien Deutschland 2 can assess their eligibility for compensation claims. Experience shows that investments in real estate are often marketed during advisory meetings as secure investment opportunities and sold to investors seeking low-risk options. In reality, real estate funds are subject to significant risks, including market fluctuations and declining rental income. Investors could even face a total loss of their invested capital.
As part of proper investment advice, investors should have been informed about these risks. Additionally, the offering prospectuses must provide comprehensive and understandable information about all factors relevant to investment decisions, including the associated risks. If this information was incomplete, downplayed, or omitted entirely, investors may have grounds for compensation claims.
As an economic law firm with extensive experience in capital markets law, MTR Legal Rechtsanwälte advises investors in the d.i.i. funds on their legal options.
Feel free to contact us.
