(Bloomberg) -- The surge in global interest rates may be a tipping point for a handful of Austrian open-ended real estate funds that for years have defied one of Europe’s most troubled property markets.
The two largest retail real estate funds in Austria, run by units of UniCredit SpA’s Bank Austria and Erste Group Bank AG, limited redemptions last month after investor payout requests strained liquidity reserves. Both have pledged to accelerate asset sales.
The gatekeeping measures come remarkably late for funds with lax payout structures long banned in countries such as Germany, operating in a market that’s faced major real estate headwinds for years.
Austria is home to one of Europe’s largest ongoing insolvencies: the 2023 meltdown of Rene Benko’s €23 billion ($25.7 billion) property empire. Non-performing loan ratios for some types of Austrian commercial real estate have topped 14%.
“The run on the real estate funds will add to valuation pressure in an already strained market,” said Florian Beckermann, the head of Austria’s IVA investor association. The funds have sold most of their good assets in recent years and it’s questionable whether buyers will emerge for the rest, he said.