Nash Equilibrium

A number of open ended funds are offering their unit holders a very nice opportunity to make good usage of game theory and figure out what to do next.

Some funds (see related article in the Immobilien Zeitung -in German- http://aox.ag/lvAZK1 ), are asking their current unit holders, what would be their behavior if the funds were to reopen for redemption. The underlying idea, is that the more unit holders opt for redemption, the more likely is the fund to liquidate.

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.

Little Dorrit

Anyone interested in real estate investment is aware of the „difficult“ times the German open ended fund industry is going through. As you can expect the German press is full of article trying to figure out what happened, what a solution would be (may I naively suggest listing?) and whether or not it is safe to invest in them again.

Quality rather than quantity

The debate about the need for more transparency in the real estate listed sector is back in the Germany. In principle there is nothing bad about the requirement for more transparency. I hope that alstria has in the past demonstrated many times its willingness to provide the market with the right set of information at the right time.

There is in my opinion a dangerous amalgam between transparency and throwing unsorted information to investors. I make a big difference between being transparent and publishing each and every data available in a company. Being transparent is not equivalent to ticking each box of a list of information that needs to be published by a company. Transparency is a dynamic and subjective notion. It is about disclosing the right information at the right time and in a way that is understandable by an investor. It is a judgment call.

Evolution

Real Estate Investment Trust or REIT, is a global trademark which started in the US in the 1960’s, and is now spread across the globe. When a company define itself as a REIT, it mean that it adhere to a number of simple concept. Its is usually a listed company, its business must be real estate investment it is tax transparent, and it pays most of its profit as dividend. Although the local legislation differs here and there, those are the main characteristic of REIT worldwide.