GlobeSt.com UPDATE: German Funds Lose $4B in December

Figures released by BVI show that net outflows reached euros 3.05 billion ($3.75 billion)--a three-fold increase on the euros 108 million ($132.50 million) that were withdrawn in November. Last month also dramatically boosted total withdrawals for 2005. During the year, the open-ended real estate investment funds lost euros 3.43 billion ($4.21 billion), compared with net inflows of euros 3.06 billion ($3.75 billion) in 2004 and net inflows of euros 13.7 billion ($16.03 billion) in 2003.

The combined value of the 35 open-ended real estate investment funds fell to euros 85.1 billion ($104.41) by the end of 2005, BVI reports.

Germany's biggest bank, Deutsche Bank, closed one of its real estate funds for withdrawals in December after a run on its assets caused by Deutsche saying the property holdings would have to be revalued and that write-downs were possible.

Then this month KanAm froze its two open-ended real estate investment funds after a wave of withdrawals following a rating downgrade by rating agency Scope. The decision to downgrade KanAm funds to "sell" was prompted by an investigation by the US Securities and Exchange Commission into the accounts of KanAm's US partner Mills Corp. A KanAm statement said it had had to freeze its funds as liquidity had come close to breaching minimum requirements.

Both Deutsche Bank and KanAm have said that their property funds will be reopened but neither has said exactly when. Germany's financial watchdog, BaFin, is looking into the closures.

Analysts have said the reasons that the Deutsche Bank and KanAm funds had closed are different and that the German property market has no systemic risk. But some other open-ended real estate investment funds have also been affected. Swedish bank SEB said earlier this week its German property funds had lost euros 100 million ($122.72 million) after KanAm had frozen its second fund.