Open Real Estate Fund Devalued by Almost 17 Percent
The open real estate fund UniImmo Wohnen ZBI has experienced a dramatic decline: Following a special evaluation, its value plummeted by nearly 17 percent, as reported online by “Handelsblatt” on June 27, 2024. For investors, this translates to a loss of around 860 million euros, suffered practically overnight. According to “Handelsblatt,” this is the largest loss for a real estate fund since the financial crisis of 2008.
Economic Troubles Since the Lehman Brothers Collapse
After the Lehman Brothers bankruptcy in the fall of 2008, numerous real estate funds faced significant economic difficulties. Many investors wanted to return their shares in open real estate funds, leading fund companies into liquidity problems, with many eventually having to be liquidated. Investors lost a lot of money during this period, according to MTR Legal Rechtsanwälte, a law firm specializing in capital market law, which represented many investors’ interests following the 2008 financial crisis.
Investments in Residential Real Estate
The UniImmo Wohnen ZBI open real estate fund was launched in 2017 and is managed by ZBI – Zentral Boden Immobilien Gruppe and Union Investment, the investment arm of Volks- und Raiffeisenbanken. The fund primarily invests in residential real estate and initially performed well. Investors poured money into the open real estate fund, and at one point, the fund volume exceeded 5 billion euros. However, following the recent devaluation of the fund’s properties, the fund’s assets have fallen below 4 billion euros, a dramatic drop that should concern investors. There is also uncertainty whether this marks the lowest point or if further losses are on the horizon.
Cause of the Devaluation
The devaluation of the UniImmo Wohnen ZBI fund occurred after the fund management ordered a special evaluation, leading to a reassessment of the entire property portfolio. The result was a nearly 17 percent drop in share value on June 25, 2024, significantly reducing the value of investors’ shares.
According to Union Investment, the special evaluation was prompted by significant changes in the housing market due to the COVID-19 pandemic and, more recently, the Ukraine war. The rapid rise in interest rates and increased construction costs due to inflation have led to decreased investor demand for residential properties, putting pressure on the housing market.
Decreased Property Values
This development has also affected the UniImmo Wohnen ZBI fund. To respond to the changed requirements and fulfill share redemption requests, properties from the fund’s portfolio need to be sold. Given the current market conditions, selling at previous valuation-based prices is not feasible, necessitating a reevaluation of the entire property portfolio, according to Union Investment.
Besides the changed market conditions, other factors like the age, condition, and location of the properties might also be responsible for the devaluation, speculated “Welt” online.
With the housing market environment still strained, the question remains whether further devaluations might be necessary, which could lead to additional losses for investors.
Investor Options
The future direction of the residential real estate market is uncertain. Investors in the UniImmo Wohnen ZBI open real estate fund must weigh their options. Returning shares is no longer as quick, as post-financial crisis regulations require a twelve-month notice for share redemptions. It is unpredictable how the share price will develop during this period.
To protect themselves from financial losses, investors can also explore their legal options. They may have compensation claims if bank advisors failed to fulfill their duty of informing them of all existing risks associated with an open real estate fund. Proper investment advice requires bank advisors to disclose all risks to their clients. If this information was not provided, investors might have grounds for compensation claims. This also applies if the information in the prospectus was incomplete or incorrect.
MTR Legal Rechtsanwälte advises investors in the UniImmo Wohnen ZBI open real estate fund.
Feel free to contact us!
