# Liquidation of a Closed-End Residential Property Fund

> A closed-end German residential real estate fund is to be liquidated. Investors face losses and should examine possible compensation claims.

Source: https://www.mtrlegal.com/en/liquidation-closed-end-residential-property-fund/ · Language: en · Updated: 2025-01-27

---

## Investors in the Real Estate Fund Face Financial Losses

The closed-end real estate fund, a German residential property fund set up as a closed-end investment limited partnership, is set to be liquidated. This was communicated to investors by the Hamburg-based capital management company administering the fund in a letter dated January 9, 2025. For investors in this public fund, the liquidation means they must brace themselves for financial losses.

The liquidation of the closed-end residential real estate fund follows the insolvency of the German real estate investment group that had initiated it in March 2024. The Hamburg-based asset manager took over the administration of several real estate funds from that group after the insolvency. However, the capital management company appears to see no economically viable future for the fund and now plans the “silent liquidation” of the fund.

##

## Fund Properties to Be Sold

Subject to the approval of the banks, the fund properties are to be sold. For investors, this likely means financial losses. The capital management company has stated that real estate prices have significantly decreased since the acquisition of the fund properties. Furthermore, the proceeds from the sales will first be used to settle liabilities with the banks. Only if there is a surplus after deducting all other costs might there be a distribution to the investors. Conversely, the fund company may need to file for insolvency if the sale proceeds are insufficient to cover its liabilities and costs.

Given these grim prospects, investors should explore their legal options to protect themselves from impending financial losses. According to the economic law firm MTR Legal Rechtsanwälte, pursuing compensation claims may be an option. The firm has extensive experience in capital markets law and representing investor interests.

## Falling Real Estate Prices, Rising Interest Rates

The residential real estate fund was launched in 2020 as a closed-end public AIF. Private investors could participate with a minimum investment of €20,000. In total, investors contributed approximately €12 million.

The fund company invested in four properties located in Hamburg, Nuremberg, and Troisdorf. Bank loans were also taken out to partially finance these investments. Unfortunately, the fund did not develop as anticipated. Contributing factors included falling real estate prices and sharply rising interest rates. According to the capital management company’s communication to investors, these challenges eroded the fund’s liquidity and prevented necessary modernization and maintenance work on the properties. Consequently, planned rent increases could not be implemented.

## No Economically Viable Solution Found

The capital management company explored various options for continuing the residential real estate fund. However, no economically viable solution could be found. As a result, the “silent liquidation” involving the sale of fund properties is now planned. This, however, depends on the cooperation of the banks, as noted in the communication.

In addition to this fund, the real estate group also launched a second closed-end residential real estate fund as a public fund. In this case, insolvency proceedings were initiated against the fund company in October 2024. Similarly, investors in this fund have faced disappointment, with no substantial returns and the prospect of significant financial losses instead.

## Investor Compensation Claims

To mitigate their losses, investors in the two closed-end residential real estate funds can assess their eligibility for compensation claims. Experience shows that investments in real estate are often marketed during advisory meetings as secure investment opportunities and sold to investors seeking low-risk options. In reality, real estate funds are subject to significant risks, including market fluctuations and declining rental income. Investors could even face a total loss of their invested capital.

As part of proper investment advice, investors should have been informed about these risks. Additionally, the offering prospectuses must provide comprehensive and understandable information about all factors relevant to investment decisions, including the associated risks. If this information was incomplete, downplayed, or omitted entirely, investors may have grounds for compensation claims.

As an economic law firm with extensive experience in capital markets law, MTR Legal Rechtsanwälte advises investors in the funds of the insolvent German real estate investment group on their legal options.

Feel free to contact us.