Greenman Open, a €1.26 billion German supermarket real estate fund, has warned its mainly Irish investors that people seeking to cash in now may not get full value if properties need to be sold.
The alert comes as the fund, which is backed by about 8,000 Irish investors, faced an uptick in redemption requests in the third quarter of this year.
This follows three developments: a delay in repayments due in July as the fund sought to preserve cash as it moved to a new system for investors to buy and sell units of the fund; Aviva removing the fund from a key investment platform; and several investors who had piled in during the Covid-19 pandemic looking to cash in after a three-year lock-up.
The fund’s redemption requests amounted to just over 5 per cent of its net asset value in the third quarter, compared to a quarterly average of 2 per cent over the past five years, chief executive Johnnie Wilkinson told The Irish Times.
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Greenman Open said investors putting in “knee-jerk” redemption requests may not recover the prevailing net asset value of their investment if the fund makes a loss selling underlying properties to meet demands while upholding its regulatory requirement to hold at least 10 per cent of assets in cash.
“It’s our obligation to give investors a warning that that might happen,” he said, adding that the aim was to treat ongoing investors fairly, rather than burdening them with costs of meeting redemptions to others.
The fund is working on a plan to potentially divest some assets, if needed, subject to board approval, he said.
The fund is invested in 85 retail properties in Germany leased to supermarket chains such as Aldi, Lidl, Edeka and Rewe. The portfolio has a 97 per cent occupancy rate and generates €59.6 million in gross income annually.
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The fund is regulated in Luxembourg, while the Central Bank of Ireland authorises the management company.
Greenman was established in 2005 by Mr Wilkinson and fellow financial adviser Peter O’Reilly. They set up its flagship Greenman Open fund in 2014. It was converted last year into a European Long-Term Investment Fund, which allows for an EU-wide distribution to both professional and retail investors under a single passport.
As part of that conversion, the operators are seeking to develop a system for investors to buy and sell fund units through a so-called order-matching system. That would run in addition to the normal redemption process and is expected to be up and running by the end of the year.
Greenman was due to meet redemption requests made in the fourth quarter of last year by the end of June – a six-month lag. However, the board decided to hold off making the payments “as part of liquidity planning for a new liquidity management tool”, said Mr Wilkinson.
Aviva removed the fund from its popular self-directed investment option last month. “This decision was taken in light of confirmation received from Greenman Investments, the fund manager of the Greenman Fund, of a delay in the payment of redemptions,” said a spokesman for the insurance group.
Mr Wilkinson said he believed it was also down to the interests of Greenman Open and Aviva “no longer being aligned”. The minimum investment through Aviva’s self-directed investment option ended up being €100,000, while Greenman lowered its minimum threshold to €1,500 after the conversion.
He said delayed payments due on redemption requests at the end of 2024 and the first quarter of this year would be made around November 28th.
Greenman Fund, which mainly uses the Irish financial broker market for distribution, is aiming to expand its investor base under the new structure, particularly to the German market, where 900,000 people visit one of its stores weekly, according to Mr Wilkinson. The fund’s operators are also in talks with personal retirement savings account providers to broaden its investment base.
