Nov 12, 2010

Hold your fire

We had the question on alstria’s quaterly call this week. Listening to other German real estate companies call, and reading a number of analyst note, it seems that there is a growing number of (non German) market participant who expect “distressed sales” coming from the German open ended funds (mainly of the ones which said they will liquidate).

Is German open ended funds liquidation a great buying opportunity for real estate investor? The answer, is probably no. Or at least not yet.The fund managers have three years to sell their assets. Therefore, they expect that the liquidation is going to be done in an orderly manner, with little “distress” attached to it, and they might as well be right.

On the other hand, any rational buyer, the one that does not want compulsively to acquire an asset, should refrain from buying from these funds. All the buyers acting globally have an interest in doing nothing for the next three years. By then, the funds will become forced seller, and the assets will come cheaper than they would today. None of us have an interest in buying now, while we all know that prices will have to move down as pressure will build up over time. For now, you may ambush, you may aim, but you should hold your fire.


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