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The Discount to NAV of distressed German open-ended real estate funds

Author

Listed:
  • Sebastian Schnejdar
  • Michael Heinrich
  • René-Ojas Woltering
  • Steffen Sebastian

Abstract

The German open-ended real estate fund industry was strongly hit by massive outflows in the course of the global financial crisis. In total, 18 public and institutional real estate funds had to stop the redemption of shares and were ultimately forced to liquidate their portfolios. Investors of these funds either have to await the stepwise liquidation of the funds` assets, which can take up to several years, or they can opt to sell their shares on the secondary market, often at a substantial discount to the Net Asset Value (NAV Spread). This paper attempts to explain the NAV Spread of distressed German public open-ended real estate funds. The unique monthly dataset contains fund specifics and macroeconomic indicators for the entire relevant period. Fundamentals like the leverage ratio and the liquidity ratio as well as industry-wide spillover effects from fund closures affect the NAV Spread. Moreover, we detect a considerably influence of macroeconomic uncertainty explaining the discount to NAV.

Suggested Citation

  • Sebastian Schnejdar & Michael Heinrich & René-Ojas Woltering & Steffen Sebastian, 2017. "The Discount to NAV of distressed German open-ended real estate funds," ERES eres2017_160, European Real Estate Society (ERES).
    • Handle: RePEc:arz:wpaper:eres2017_160
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    bank run risk; Liquidity Transformation; NAV Spread; Open-ended real estate funds; Uncertainty;
    All these keywords.

    JEL classification:

    • R3 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location

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