Explaining the discount to NAV of distressed German open-ended real estate funds

Sebastian Schnejdar, Steffen Sebastian, René-Ojas Woltering and Michael Heinrich

ERES from European Real Estate Society (ERES)

Abstract: The German open-ended real estate fund industry was strongly hit by massive outflows in the course of the financial crisis. In total, 9 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 fund’s 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 Net Asset Value (NAV). This paper attempts to explain the discount to NAV of distressed German open-ended real estate funds on the secondary market. Our unique dataset covers monthly observations of fundamental, as well as sentiment-related variables over the 2008 to 2014 period. We find the discount is primarily related to fundamental factors such as fund leverage, liquidity and expenses, but also external factors such as the share of institutional ownership or negative spill-over effects from the closure of other funds.

JEL-codes: R3 (search for similar items in EconPapers)
Date: 2016-01-01
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Persistent link: https://EconPapers.repec.org/RePEc:arz:wpaper:eres2016_144

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