Before the end of this year, DEGI Deutsche Gesellschaft für Immobilienfonds mbH intends to launch a new fund focused on the opportunities offered by the German property market for business investors. Like the globally investing DEGI GLOBAL BUSINESS launched in 2005, DEGI GERMAN BUSINESS, with a minimum investment of €500,000, is geared specifically to the needs of institutional investors, family offices and affluent private customers.
In order to maximise the proportion of cash flow income from properties, the customers' monies will not be called until shortly before the purchase of suitable properties (cash-call strategy). DEGI GERMAN BUSINESS carries no front-end load, and provides for redemption charges graduated by length of ownership, which is channelled into the fund's assets.
Focus on Germany as an auspicious hot-spot
The fund is based on the situational assessment that the German market for commercial properties is at the beginning of an upturn, and thus currently ranks among the particularly attractive markets internationally for property investors. The DEGI GERMAN BUSINESS fund intends to invest predominantly in German commercial properties at the five investment centres and major regional locations.
The principal focus here is on office properties, while retail and logistical properties
account for approximately 30 and up to 25% respectively of the initial portfolio being targeted. The properties will be selected by reconciling research-defined top-down criteria with the market situation at the location involved (bottom-up). The fund will here be opting for investment locations that in the estimation of DEGI Research are going to exhibit a high potential for appreciation over the next five years. The investment concept also provides for some of the initial portfolio to be sold as the property cycle changes. The portfolio can, moreover, particularly in a later phase, be diversified with properties in the rest of Europe.
Open ended property funds increasingly popular with institutional investors
Their low correlation with stocks and bonds make open ended property funds a typical property investment in regard to diversification of institutional investments. "With this product, we are combining the opportunities of a market phase to the characteristics of a stable-valued mode of investment, and meet with the product's setup the expectations of institutional customers", says DEGI's Managing Director Thomas Linker. Surveys show that many asset managers, in order to diversify their trust assets, are continuing to opt for open property funds, even with the possible introduction of REITs in Germany. The DEGI GLOBAL BUSINESS fund, launched in November 2005, had by 30 September 2006 attracted investments totalling €139 million, and exhibits an appreciation of 4.32% since being launched, corresponding to an annualised performance of 4.74% p.a.
Key data in overview:
The DEGI GERMAN BUSINESS (SIN A0J3TP, ISIN DE000A0J3TP7) is scheduled for launching before the end of 2006, in dependence on the first property purchase. The fund has already been approved by the German regulators BaFin, so that once launched it is automatically approved for sale in Germany. The minimum investment is €500,000. The fund carries no front-end load. A redemption charge of 4.0% is levied in the first year after purchase of the fund units, 3.0% in the second year, and 2.0% in the third year. After this, redemption of the units is free of any redemption charge. The management fee is 0.7% per annum. Purchases and sales, construction and conversion of properties, are remunerated with 1.0% of the value involved. The custodian bank is Dresdner Bank AG. The custodian bank's fee is 0.05% per annum. The business year ends on 30 June. Income is paid out. Sales prospectuses are available from DEGI.