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Morningside, founded in 1923, has been one of the better addresses in Atlanta from the start.
A district whose residents are passionate about a good quality of life locally.
The first school was built in 1929, financed with the money from the neighborhood.
Today the volunteer organization Morningside Lenox Park Association ensures that the green spaces in the sought-after residential area of the capital of the US state of Georgia are maintained, damaged benches are repaired and holes in the asphalt of footpaths and bike paths are filled.
Last December 585 rented terraced houses in the district changed hands there.
They now belong to 5,719 German investors who have put more than 335.3 million US dollars into the closed real estate fund 31 of the Cologne-based investment company Jamestown.
The Rock Springs Court residential complex is one of a total of six real estate properties that the fund, which was launched in summer 2019, has acquired in the USA to date, including office complexes and retail properties.
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"Together with the rental housing complex in Atlanta and the properties that have already been purchased, Jamestown 31 is broadly diversified and offers interesting development potential," says Managing Director Fabian Spindler.
The annual dividend paid to investors of two percent on their invested equity in the current placement phase is to be increased to four percent from 2022.
In addition, private investors should get back at least 110 percent of their invested money if the fund is liquidated by 2031 at the latest.
Not only Jamestown, one of the veterans among the providers of closed real estate funds in Germany, is currently looking for capital from investors for real estate investment models.
Other providers, including the initiators Habona and US Treuhand in the Main metropolis of Frankfurt and the Silberlake Real Estate Group in Düsseldorf, are currently selling funds.
"The crisis triggered by the corona pandemic offers buyers opportunities," says Volker Arndt, managing director of the US trust, which specializes in real estate investments in the United States.
The currently active initiators have survived a tough selection process.
Criminal machinations and insolvency of providers brought the industry into disrepute a good ten years ago.
In 2013, the Federal Government therefore regulated the previously unregulated “gray capital market” with the Capital Investment Act.
New name: Alternative Investmentfonds, AIF for short
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The name of the investment products has also been changed.
Since then, they are no longer called closed funds, but alternative investment funds, or AIFs for short, and have since been monitored by the Federal Financial Supervisory Authority (BaFin).
The industry has not yet been able to make up for the loss of trust it has suffered.
In 2008, investors had invested 12.66 billion euros in closed-end funds.
In 2019, on the other hand, according to a study by the Berlin rating agency Scope, closed AIFs were only able to place EUR 1.54 billion in equity with their customers.
Last year it was only 1.2 billion.
"That corresponds to a year-on-year decrease of 21 percent," says Stephanie Lebert, senior analyst at Scope.
A major reason for this are the lockdowns imposed to combat the corona pandemic.
AIF investments are brought to the investors to a small extent by banks and mostly by independent financial brokers.
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But they hardly have any digital distribution channels.
“Independent financial brokers were therefore faced with challenges due to the contact restrictions,” says Lebert.
"Bank branches, on the other hand, were temporarily closed or only opened to a limited extent."
This made it much more difficult for AIF initiators in the pandemic than it was for the providers of open-ended real estate funds, who mostly cooperate with banks, to attract investors.
According to the industry association BVI, the open backstone funds were able to generate 8.3 billion euros in net inflows in the past year - almost seven times the equity placed by AIF providers.
There are mutliple reasons for this.
Many investors invest continuously in open real estate funds through monthly savings plans, which is usually not possible with closed AIFs.
This automatically ensures an inflow of funds.
In addition, banks also sell the more simply structured open-ended funds through telephone advice.
Minimum investment amount for closed funds: 10,000 euros
“Their customers can already invest in an open fund with small amounts of 50 euros or more,” says Stefan Loipfinger, publisher of the investor information service Investmentcheck.de.
"That is why it is not difficult for bank advisors to sell shares in open-ended real estate funds over the phone."
In contrast, the minimum investment amount for closed AIFs is at least 10,000 euros, often even more.
“No investor puts such amounts on the table when a freelance financial broker calls him,” says Loipfinger.
"In these cases, you want to have the opportunities and risks of the investment explained in detail in a personal meeting."
What makes the advisory effort even more difficult: Closed AIFs are designed as limited partnerships.
"Investors enter into an entrepreneurial stake in them," says the expert.
"They become shareholders and are liable with all of their invested equity should the company go bankrupt." Such subtleties could not be explained on the phone.
In contrast to open-ended funds, the term of closed AIFs is limited to eleven to 15 years.
The properties are then sold and the amount achieved is distributed to the shareholders.
In the case of open-ended real estate funds, investors can withdraw their capital after a minimum holding period of 24 months and a notice period of twelve months.
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"If you participate in an AIF, however, the money is tied up until the end of the term," says Loipfinger.
This could even be extended if it is not possible to find a buyer for the real estate who is willing to pay the calculated price when the fund is liquidated as planned.
Ships, planes or solar parks
Closed AIFs allow investors to invest not only in real estate, but also in various tangible assets - from cargo ships and aircraft to wind and solar parks.
“However, real estate is still the dominant asset class,” says analyst Lebert.
Of the 1.2 billion euros that the providers were able to collect last year, 842 million euros, around 70 percent, flowed into real estate AIFs.
“The real estate share would have been even higher if Jamestown hadn't stopped acquiring its current Fund 31 in January of last year,” says market expert Loipfinger.
By then, the Cologne-based provider had already been able to collect $ 320 million in equity commitments for the real estate AIF launched at the beginning of October 2019 and thus acquired the first three properties with a total value of $ 249 million.
Because other suitable properties could not be found so quickly, the company stopped sales until the end of January this year.
Since then, three more properties have been acquired, including the terraced housing estate in Atlanta.
The fund is now accepting fresh capital again.
Several other providers are currently also looking for private investors.
The Düsseldorfer Silberlake Real Estate Group has just launched its first AIF for private investors with the Silberlake Wohnen Fonds 20.
The company wants to collect 15 million euros.
Up to 20 million in loans are also to be taken out in order to acquire rental apartments with development potential in the Rhine-Ruhr region and in the metropolitan areas of Düsseldorf and Cologne.
“The Rhine-Ruhr region is often underestimated as an investment location,” says John Bothe, managing partner of the company founded in 2015, which has since acquired around 2,000 residential and commercial properties.
The area benefits from its central location in Europe.
"In addition, the 60 universities and technical colleges with their more than 486,000 students are a driver of the rental housing market," says Bothe.
"In the long term, the region will be attractive to young people because of the low cost of living and housing as well as the high quality of life." The fund is to be liquidated at the end of 2032 and will generate distributions of initially three percent and later five percent.
The minimum participation amount is 10,000 euros.
The US Treuhand has just launched its 25th retail fund.
The UST XXV plans to raise up to $ 125 million to purchase office, logistics, commercial and residential real estate in metropolitan areas in the southeastern United States.
The minimum investment is $ 20,000.
"The founder and majority owner of US Treuhand, Lothar Estein, will participate with a significant amount," says Arndt.
"The Southeast is the fastest growing region in the US," says Arndt.
“More and more national and international companies have been settling there for years and creating jobs.” Times of economic crisis always offer a good opportunity for investments in US real estate because their prices quickly come under pressure during downturns.
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“This was also the case with the financial crisis in 2008,” says Estein.
"At that time, we took the opportunity and issued the UST XIX fund, which achieves a return of twelve percent per year for investors." The UST XXV is expected to distribute three percent this year, and 4.5 percent from next year.
The term of the fund is to end on December 31, 2031 - with an extension option until the end of 2036 at the latest.
Investments in German properties are also possible
Habona Invest has already raised more than 46 million euros from private investors for its German retail real estate 07 fund, which was launched last year, and thus more than 90 percent of the equity share of 50 million.
Not surprising.
The AIF invests in those properties that flourish even in lockdown: 20 local supply centers with main tenants such as Edeka, Lidl, Netto and Rewe.
The investment strategy “fulfills the desire of our investors for security and return at the same time”, says Johannes Palla, managing partner of Habona Invest.
"All properties are firmly let for well over ten years and generate 100 percent rents from the food retail sector." In the course of the year, Habona wants to start another AIF that also invests in retail parks.
This means that the Frankfurt-based provider should continue to belong to an exclusive group within the industry.
The rating agency Scope expects that this year the issuing activities of public AIFs will be at a level "slightly below the year 2020".
The ongoing corona crisis could "lead to negative effects in the volume of offers and, above all, in the composition of the offers," says analyst Lebert.
Investors are particularly interested in funds that invest in rental apartments, logistics and food retail properties.
But they are increasingly difficult to find at attractive prices.