The Verius real estate fund has been frozen since November 2022. In the event of the fund’s dissolution, losses of up to 500 million euros could occur according to a report by Handelsblatt.
With a volume of around 1.2 billion euros, the Verius real estate fund is one of the heavyweights. Nevertheless, it is at risk of running out of steam. Since the end of 2022, share redemptions have been suspended, and distributions have also stopped. The predominantly institutional investors cannot access their money. Memories of the problems of open real estate funds following the financial crisis are revived, according to MTR Legal law firm, which has a focus on capital market law.
The fund specializes in financing real estate projects, raising money primarily from institutional investors and passing it on as high-interest loans or bonds to project developers. In times of restrictive monetary policy by many banks, many project developers needed financing outside of traditional bank loans. Accordingly, funds like the Verius real estate fund boomed.
However, with the end of the long-standing low-interest-rate phase, some developers have come under pressure and can no longer service the bonds and loans. In many projects financed by the Verius fund, construction work has come to a halt. Due to the development, the investment management company Hauck & Aufhäuser Fund Services wants to re-evaluate the securities in which the fund invested. This decision was made months ago. However, the fund remains frozen and investors cannot access their money.
According to a report by Handelsblatt on June 16, 2023, the situation of the fund is exceedingly serious. Approximately 70 percent of the securities in which the fund has invested are at risk of default, according to the report, which references the contents of a video meeting from May 2023, available to the paper. In the event of the fund’s liquidation, losses of around 500 million euros are expected.
Additionally, there are indications that the fund’s plight cannot be explained solely by the changed market situation and involves mutual blame.
For investors, the main concern now is to avert financial losses and take full advantage of their legal options.
At MTR Legal, investors are advised by attorneys versed in capital market law.
