* Expects to invest 1.7 billion euros globally in 2009
* Sees the bottom for property markets this year
* Still sees fund inflows, won't freeze withdrawals (Adds details, interview with MD)
By Daryl Loo
LONDON, Jan 28 (Reuters) - DekaBank, Germany's largest manager of property funds, expects to invest about 1.7 billion euros ($2.25 billion) in 2009 through its real estate funds, even as other German funds hold back due to lack of liquidity.
It is targeting to spend up to 25 percent of the money on German assets, and the rest outside the country, DekaBank said on Wednesday, after it had spent a similar amount on property purchases last year.
But the fund manager intends to move "very carefully and step by step" as prices remain in freefall, said Franz Lucien Moersdorf, managing director of DekaBank units Deka Immobilien and WestInvest, in an interview.
"We would guess that we will see the bottom for real estate this year," said Moersdorf, whose firms manage a combined 17 billion euros in assets.
"The markets are in our favour. Cap rates are still shifting up, and it is a buyers' market for those in a strong equity position," he said, adding cap rates, or yields, should be midway through their expansion so far.
Several German open-ended funds, which in theory allow investors to inject or redeem their money on a daily basis, were forced to freeze redemptions since October as they lacked the liquidity to satisfy investors' desire for cash.
"We didn't close any of our five open-ended funds, and we won't close as far as I can talk about this today. The amount of liquidity we have is significantly high enough not to have the problems that our competitors have," said Moersdorf.
NET INFLOWS
Instead of seeing the rush by equity-starved investors to withdraw their cash as at asset managers such as SEB and KanAM, Moersdorf said Deka's funds continue to see daily net inflows of 7-10 million euros per day.
"We have a huge advantage compared to other open-ended funds because we have a vast network for distribution through our savings bank," he said, adding that this allowed Deka to tap a potential network of 50 million customers.
"Also, as we do not have many major institutional investors in our funds, we have not seen the same pull-out of funds that is seen among our competitors," he added. According to data from German mutual funds association BVI, German property funds' investors, spooked by the collapse of Lehman Brothers which froze global credit, withdrew a massive 5.1 billion euros in just October 2008 alone.
But Morsdorf said Deka's investors continue to have a strong appetite for real estate, especially outside Germany where yields in countries such as the UK have hit about 6.5 percent in prime locations.
"Our international funds are the most requested by our clients. We will continue to invest in the U.S., UK, Australia, and in Korea, Japan, and Mexico, maybe new countries like Singapore," said Moersdorf, without specifying the allocation.
The subprime mortgage crisis, into its second year in the United States, has thrown up a surprise for Deka however, spoiling its plans to snap up prime assets from distressed sellers.
"The subprime crisis started two years ago, but the amount of distressed properties in the U.S. is still astonishingly low," said Moersdorf, adding cap rates have largely held steady as owners refused to offload into a falling property market.
"We expect this might change slightly and there would be some off-market deals for distressed property, but not at the amount that you would expect from a large market like the U.S."
(Reporting by Daryl Loo; Editing by Rupert Winchester)
(See www.reutersrealestate.com for the global service for real estate professionals from Reuters)