Barbara Knoflach, SEB Asset Management

What has SEB Asset Management been up to over the past 12 months? How has your business changed along with the changes in the European economy and real estate markets?

"The last 12 months has been a quite eventful time. SEB Asset Management has a two-fold business, focusing on both institutional and retail investors. On the institutional side we have seen a flight into core business, to safer, low-risk, equity-driven investments and also a shift towards Asia. We have launched three new Asian funds – one focused on international investors; one fund for German investors, which is a special fund under German law and pursues a core/core+ strategy; and one that invests exclusively in REITS in the Asia-Pacific region.

"The retail side of the business has been a totally different story. SEB ImmoInvest will be dissolved due to the dramatic changes in the market caused by the financial crisis and new regulations. We’re working now on achieving the best possible outcome for its investors."

How has the business been affected by changes in regulation?

"The situation for open-ended real estate funds in Germany has changed dramatically, starting with the discussion paper on the Anlegerschutz- und Funktionsverbesserungsgesetz (AnsFuG – Act to Increase Investor Protection and Improve the Functioning of the Capital Market), which was basically the starting point for massive capital outflows from open-ended real estate funds and resulting fund closures and dissolutions. The discussion draft on the legislation implementing the European AIFM Directive in Germany that was recently published was also surprising, and would lead to further major changes for the open-ended fund world and the whole industry.

"For example, no more open-ended real estate funds and no more German real estate Spezialfonds could be launched – only existing ones would have the right to continue. It is currently just a discussion paper, so we shall have to see what is enacted in the end. I am convinced that real estate investments will remain important in future for both institutional and private investors, but it is already clear that they will have a new wrapping."

Where are you currently investing?

"We are currently very active in Asia, as we are net sellers in Europe having sold around €1 billion (in 20 properties). It’s in Asia that we see the biggest opportunity, though we still see big appetite from investors in Europe, who are very much focused on core. This makes Europe, and particularly strong countries such as Germany, an extremely expensive market as everyone is looking for a good income stream. Therefore we are focusing our search for higher yields and growth overseas. Investors rather take risk in overseas markets than at home. In particular we are looking at the major cities in the likes of Japan, China and Singapore."

What is the outlook for the German real estate market from the sellers’ perspective?

"Germany is really a hot market at the moment, particularly with regards to smaller investments, for example if you have an asset of between €30-50 million that is of decent quality, that is well let and is located in any of the core cities in Germany, and even now in the smaller secondary cities in Germany.

"In the €50-100 million market, there are still equity-strong investors and it seems to be moving ok as long as you can get financing and a creditworthy buyer. The market for assets over €100 million is much smaller, you can almost count the investors on one hand. The main restriction here is financing. There are investors, but they are always looking for a discount, so a gap remains between sellers’ and buyers’ expectations."

So who are the major investors?

"Surprisingly the market is totally fragmented now. Investors are made up of sovereign wealth funds, pension funds all other types of investors from all over Europe and internationally. We saw the end of the dominance of the pension funds last year and now it is wide open. I really think this is a reflection of the flight into hard assets due to the ongoing euro and banking crisis."

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