The Shrimp, the Pension Fund and the Billion-Euro Cavity

It takes a special set of decisions to turn a respectable Berlin dentists’ pension fund into a backer of shrimp ponds and a plastic recycling plant in Los Angeles. But that, in the simplest possible terms, is what happened at the Versorgungswerk der Zahnärztekammer Berlin, the VZB. A fund that once held more than €2.2bn now expects to write off about half of it, most of it staked on direct investments and loans that were supposed to produce higher returns in the lean years.

The story is so strange that even those who follow German real estate closely have found themselves asking whether any other fund has a crustacean farm tucked away in its portfolio. The answer is probably no. But the more useful question is why the VZB thought this was a sensible route to securing 11,000 dentists’ retirements.

The low interest rate era explains part of it. With bonds yielding little and pressure mounting to deliver better returns for members, the committee responsible for investment convinced itself that steady income could be conjured from start-ups, special-use real estate and ventures that only look prudent with hindsight gently blurred. The VZB began to behave like a venture fund without a strategy.

It didn’t help that the committee was largely made up of practising dentists. Perfectly competent with teeth, and no doubt with admirable professional ethics, but not, on the evidence of events, seasoned judges of credit quality and operational risk. Some investments proved completely fanciful. An 80%-owned digital insurer collapsed. A holiday resort on Ibiza and other hotel projects, since gone bust. The shrimp ponds swallowed €15m. The Los Angeles plastics plant took €200m despite early warnings. Almost all of it has gone.

The sums are so large, and the failures so widespread, that the Berlin public prosecutor is now investigating possible corruption offences. If losses really do amount to €1.1bn, the pensions of thousands of dentists will be hit. Some have already talked darkly of “system collapse” and written to the Federal Minister of Health calling for a rescue fund. The ballot box has also spoken. The make-up of the local “dentists’ parliament” shifted sharply in this month’s election, with voters punishing groups perceived to have been close to the failed strategy.

For the rest of us, 2025 has offered clearer lessons than any ethics course. The VZB case shows how easily the search for income can slide into magical thinking when returns look dull and the cost of capital is zero. It shows how hard it is for institutions to admit that something has gone wrong, even when red lights are flashing. And it shows how tempting it can be to call for a bailout when the music stops.

These are familiar themes from the past decade in German real estate. Yield compression sent investors up the risk curve into operational formats, data centres and private markets. At the time, risk was softened by optimism, but rising rates have since rewritten the numbers.

German capital on the sidelines

Yet something interesting happened this year. In several parts of the market, foreign capital became noticeably bolder than domestic money. On deals we followed through 2025, the bidder lists often told their own tale. International buyers, looking across the economic cycle, were prepared to accept that today’s cost of money may be as good as it gets. They underwrote scarce logistics, modern supermarkets and energy-efficient residential stock on the basis of replacement cost, rents and long-term demand. They were not waiting for valuations to fall further or finance to turn cheaper.

A notable slice of German capital, by contrast, remained largely on the sidelines. Perfectly rational on one level. But the longer the pause continues, the more acute the opportunity cost becomes. One can see the outlines already. Who will own the most liquid, best-located assets in 2030? Who will shape the market’s recovery narrative? Who will capture tenant relationships and embedded income growth? At present, many of the names on the list are not German.

The parallel with the dentists is not exact, but it is real. There is comfort in waiting. The assumption is that time itself will restore values, ease financing and widen margins. The uncomfortable truth is that time can also do harm. A pension committee that sits quietly for years, telling itself that past decisions will improve if they are not disturbed, is not being prudent. It is being passive. In real estate investing, as in dentistry, decay does not fix itself.

There is another echo worth noting. The appeal for a federal rescue fund at the VZB arrived swiftly once the scale of losses became clear. The argument was that dentists are vital to public health. Perhaps. But the politics of rescue are growing narrower. There are limits to the appetite for socialising private losses, particularly when other taxpayers face pressures of their own. We see the same tension in real estate: the implicit hope that the state will cushion the cost of energy transition, rescue stranded developments, or legislate away risk. The message from 2025 is that the state will help, but not everywhere, and not always. The lesson, then, is not to retreat but to adjust.

None of this means the coming year must necessarily be bleak. On the contrary, 2026 looks increasingly like the year when activity begins to reassert itself on the back of firmer pricing. In many segments there is now a sense of floor, and in some a sense of forward motion. Investors with conviction, and the balance sheets to back it, will have room to run.

Still, as we line up the last REFIRE issue of the year, the shrimp remain there in the corner of the room, waving their little antennae at us. They remind us that nothing is too strange to happen when money feels free, and that other people’s savings deserve a level of doubt and discipline that does not come naturally in the happy part of the cycle. As ever, REFIRE wishes all our readers a peaceful Christmas and a restorative break. As the year turns, may your assets be sound, your lenders calm, and your pension funds untouched by anything that once paddled, scuttled or swam — we'll have more than enough to deal with on dry land in 2026.