The Verius real estate financing fund has been frozen since November 2022. According to a report by German business newspaper Handelsblatt, if the fund were to be dissolved, this could result in losses of up to 500 million euros.
Despite its status as a heavyweight valued at around 1.2 billion euros, Verius is in danger of collapsing. The redemption of shares has been suspended since the end of 2022, dividend payments have stopped, and the (mainly institutional) investors are not able to access their money. The situation is redolent of the problems that faced open-ended real estate funds in the wake of the financial crisis, notes commercial law firm and capital markets experts MTR Legal Rechtsanwälte.
The fund specializes in financing real estate projects and has attracted funding from primarily institutional investors on this basis, which it then passes on to project managers as high-interest loans or bonds. During periods of restrictive monetary policy at a lot of banks, many project managers were in need of financing outside of traditional bank loans. And this led to a boom for funds such as Verius.
But the end to this prolonged period of low interest rates has resulted in a number of property developers coming under pressure and being left unable to continue servicing the bonds and loans. Many of the construction projects financed by Verius have been put on hold. This development has prompted investment management company Hauck & Aufhäuser Fund Services to want to re-evaluate the securities that the fund has invested in. While the decision was made months ago, the fund remains frozen and the investors are unable to access their money.
A report by Handelsblatt from June 16, 2023, describes the situation the fund finds itself in as extremely serious, with approximately 70 percent of the securities that the fund has invested in said to be at risk of defaulting. The business newspaper cites as its source the content of a video meeting that took place in May 2023, which the paper claims to have had access to. The report speaks of expected losses to the tune of around 500 million euros if the fund is liquidated.
There are also indications that the plight of the fund cannot be attributed solely to the changing market conditions amidst a climate of mutual finger-pointing.
For the investors, the main priority now is limiting financial losses and exhausting their legal options.
To this end, they can turn to the team of capital markets experts at MTR Legal for advice.