Volume 7, Issue 135, August 6th, 2015 Allianz leads consortium to win Tank & Inside REFIRE Rast prize in largest infrastructure deal REFIRE is a specialised report focused on providing market intelligence and back- The wheel is turning full circle for German insurer Allianz, as the consor- ground analysis to finance professionals tium headed by its infrastructure arm has won the bidding for motorway in German and continental European real services company Tank & Rast from the Guy Hands-led UK private equity estate investment. company Terra Firma. Allianz sold the company for about a third of the purchase price to the sellers just over ten years ago, and is now back at Whatever your particular area of speciali- the helm of what has become a much larger enterprise in the intervening sation, we think you’ll find timely, incisive years. The deal is one of the biggest German infrastructure deals ever. information within our pages, helping to in- form you of the key deals, the numbers, the The investment consortium led by Alli- Conwert calls off talks to markets, the players and the people. anz is thought to be paying about €3.5bn buy €1.1bn BGP portfolio for Tank & Rast, according to news agen- Barely three months after fending off a The areas we focus on are: cies Reuters and dpa. (We had report- takeover offer for itself, Austrian listed ed this figure several times as being the property company conwert Immobilien In- US Funds in Europe asking price, once it was clear that the vest has broken off exclusive talks to buy European REITs original plan of a strock market listing was the €1.1bn residential property asset port- German Real Estate Finance no longer seen as feasible). The investing folio of BGP, the company spun off by the German Non-Performing Loans (NPLs) consortium consists of Allianz Capital Australian GPT Group in 2009. see page 3 Retail Property Funds Partners, Borealis Infrastructure Man- Mortgage Securitisation agement, Infinity Investments (a whol- Record first half for German CMBS/RMBS ly-owned subsidiary of the Abu Dhabi retail at nearly €10bn Privatisations Investment Authority) and MEAG, the New figures just in from property brokers Refinancing asset manager of insurer Munich Re. CBRE confirm that foreign investor inter- Euro-zone Property Financing Borealis Infrastructure is backed by est in German retail real estate remains the Ontario Municipal Employee Retire- undimmed. Compared to last year’s first REFIRE has an extensive network of con- ment System (“OMERS”), one of the larg- half, total investment volume in German tacts in the field of continental European est pension funds in Canada with 450,000 retail more than doubled in the first six real-estate finance, which enables us to members and $72.0bn in net assets. months to €9.8bn - fuelled by see page 6 bring you the latest and most relevant news. Those losing out in the bidding pro- However, we always want to know more cess include the giant China Investment Cerberus engages UBS to about what’s going on in this dynamic sec- Corp and a consortium led by the infra- sell off German retail assets tor, so make sure your company is keeping structure arm of Australia’s Macquarie Private equity group Cerberus has hired us informed of your moves. Send your me- Capital and including Italian autostrada UBS to find a buyer for its German cash dia communications to news@refire-online. concessionaire Atlantia, who had both & carry markets after abandoning its origi- com for our consideration. submitted binding bids before last week’s nal plan to list its retail division through an deadline. The Chinese consortium were IPO. The assets, many of which are whole- thought by observers to be moving into sale markets leased to Metro, are thought CONTENTS in this Issue: the role of favourite recently, and their bid to be worth up to €1bn. see page 12 is unlikely to have fallen much short of DEALS ROUNDUP / from page 3 that of the winning consortium. New platform GEG kicks off EDITORIAL / page 4 The new buyer consortium described with €160m Munich assets REPORT - /ROUNDUP page 10 themselves as like-minded investors The newly-established German Estate UPCOMING EVENTS / page 29 “pursuing a strategy of generating sta- Group (GEG), the platform created by PEOPLE…JOBS…MOVES / ble and predictable returns over the long Frankfurt-based developer and property SUBSCRIPTION FORM / page 34 run”. In a joint news release they said: “As manager DIC and the US buyout group market leader in Germany, Tank & Rast is KKR, has kicked off its investment pro- an attractive investment for all of us due gramme by buying two assets to page 24 2

...... DEALS ROUNDUP

to its long-term and stable investment Germany/Acquisitions REFIRE characteristics and its stable regulatory France’s Amundi emerges Real Estate Finance and contractual environment.” as buyer of Union’s €1bn Intelligence Report Europe The Tank & Rast chain has 390 auto- Aqua portfolio bahn service areas, 350 petrol stations and 50 hotels, making it the largest ser- French investor Amundi Immobilie is the Operating Office vice provider of its type in Germany, serv- buyer of Union Investment Real Estate’s REFIRE Habsburgerallee 95 ing 500 million visitors a year. The group €1bn “Aqua” pan-European office portfo- 60385 Frankfurt am Main, GERMANY employs 600 directly, including 300 in lio, in what is shaping up to be one of the Tel: +49-69-49085-785 its Bonn headquarters, and over 12,000 largest portfolio transactions of the year. Fax: +49-69-49085-804 Email: [email protected] through its numerous franchise partners, The deal is likely to be completed in generating more than €3bn in annual within five months of the start of the Managing Editor: revenues. structured sales process, with up to Charles Kingston Tel: +49-69-49085-785 Terra Firma bought Tank & Rast in 2004 nine investors involved since the bidding Fax: +49-69-49085-804 for €1.1bn from Lufthansa and two funds process was launched back in March. Cell: +49-172-8572249 belonging to Apax and Allianz, six years Property advisors JLL managed the Email: [email protected] after being privatised by the German gov- bidding, but it was known that Amundi Subscriptions: ernment. In 2007 had been in exclusive ne- Tel: +49-69-49085-785 the private equity gotiations with Union In- Fax: +49-69-49085-804 Email: [email protected] group attempted to “We returned more vestment since June. sell the chain, and than five times the Amundi is one of Eu- Advertising: ended up selling just rope’s largest asset man- Tel: +49-69-49085-785 original investment Fax: +49-69-49085-804 below 50% to Deut- to our investors in agers, with total assets Email: [email protected] sche Bank’s alter- 2007 and the sale of under management of native investments €850bn, around €11bn Editorial Advisory Board: our remaining stake Klaus H. Hausen subsidiary RREEF. will increase that of which is invested in Colm O’Cleirigh, B.Arch.Sci. In a news release, multiple further” real estate. The purchase Margarete May, Rechtsanwältin Mr. Hands said, agreement is subject to the David Scrimgeour, MBE Christian Graf von Wedel “Since purchasing usual closing conditions, Glenn J. Day FRICS Tank & Rast in 2004, it has proved to be with transfer of the portfolio to Amundi Andreas Lehner a very successful investment. Terra Firma expected in the fourth quarter of 2015. Stefan Engberg, MRICS returned more than five times the origi- With the Aqua portfolio, the French Publisher: nal investment to our investors in 2007, investor is buying 17 office properties in REFIRE Ltd., and the sale of its remaining stake will in- Austria, the UK, France, the Netherlands, 49 Sandymount Avenue, Ballsbridge crease that multiple further.” Finland and Germany, with a 75% focus Dublin 4, Ireland The winning consortium has put togeth- on the UK (London, Glasgow, Cardiff), er €1.45bn of loans to back the acquisi- France (Paris) and Germany (Ismaning, Real Estate Finance Intelligence Report Europe tion, according to various sources. Among Ratingen, Frankfurt/Main). Other loca- (REFIRE) is published 22 times a year, at the be- ginning and in the middle of each month, with those providing finance are BNP Paribas, tions are Vienna, Helsinki and Rotterdam. two holiday breaks. REFIRE is editorially inde- Bank of America Merrill Lynch, Morgan The properties generate annual gross pendent of any selling or investing institutions. In- Stanley, Credit Agricole, Mediobanca, rental income of around €60m. At the formation contained in REFIRE is under copyright protection and is based on sources believed to RBC, RBS, Scotiabank and UniCredit. time of sale, 96.6% of the space was let be reliable, though their complete accuracy can- The financing includes €1.4 billion of (based on rental income). The portfolio not be fully guaranteed. Neither the information term loans, a portion of which could be is broadly diversified across 145 office contained in REFIRE nor the opinions expressed therein constitute or are to be construed as con- syndicated to other lenders. There is also tenants. stituting an offer or solicitation of an offer to buy around €50 million of undrawn facilities. Union Investment said the portfolio or sell investments. REFIRE accepts no liability Some €460 million of high yield bonds also features a high level of diversifi- for actions based on the information herein. will remain in place, due to non-call provi- cation by bringing together properties © 2015 REFIRE Ltd. sions, as will €274 million of payment-in- worth between €25m and €147m. The kind notes, the sources said. average property value is about €50m, 3 www.refire-online.com

while the average age is slightly above while also applying Germany/Acquisitions ten years. high quality stan- Conwert calls off talks to Properties from four Union open-end- dards.” buy €1.1bn BGP portfolio ed real estate funds – UniImmo: Europa, Giving a rationale UniImmo Deutschland, UniImmo Glob- for the deal, Dr. Bill- Barely three months after fending off a al and UniInstitutional European Real and referred to Union takeover offer for itself, Austrian listed Estate – make up the 278,000-sqm port- Investment’s track property company conwert Immobil- folio. Seven of the properties came from record with complex ien Invest had been in exclusive talks to the UniImmo: Europa fund and account portfolio transactions. buy the €1.1bn residential property asset for a 37% share of the portfolio. In 2006 and 2007, Union Investment con- portfolio of BGP, the company spun off Dr. Frank Billand (pictured), chief in- cluded two portfolio deals for its inves- by the Australian GPT Group in 2009. vestment office at the Hamburg-based tors: Nautilus, worth €371m, and Pega- However, late this week conwert issued Union Investment, commented: “We sus, worth €2.56 bn. “Those first portfolio a press statement saying that the compa- quickly found our ideal partner in Amun- deals were intended to make our proper- ny’s administrative board had decided that di. Their strong banking background ty portfolio more international. Aqua, our the acquisition would not currently be in provides a high level of transaction se- first European portfolio deal, reflects our the best interest of Conwert and its share- curity and they attach great importance strategic objective of reducing the age of holders. after conducting a comprehensive to a structured, thorough sale process our existing portfolio,” Billand said. due diligence review of the relevant assets.

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...... EDITORIAL

In remembrance of German REITs... nearly gone, and all too soon forgotten

It is widely acknowledged on the capital markets, and with Nonetheless, big strides have been that the German REIT industry interest rates so low, new en- taken over the past five years. In 2010, was effectively stillborn when trants clearly believe there’s life German property shares had a weight- the first REIT pioneers set out in the old dog yet. But...no point ing of 3.5% in the FTSE EPRA/NAREIT their shingles back in 2007 in dallying around. Do it now. European Property Share Index, behind - to great fanfare, and wildly Despite recent jitters caused such global powerhouses as Belgium, optimistic speculation about by the Greek crisis and the Sweden, Switzerland, and even ‘Oth- a rosy future ahead – only to plunging Chinese stock mar- ers’, with 5.5%. The UK, France and the have the global financial crisis ket, the haste with which com- Netherlands dominated the scene. rear up within months and ef- panies such as pbb Deutsche Now, five years later, Germany has a fectively snuff out their nascent sector. Pfandbrief and Berlin’s Ado Properties nearly 15% share, behind only the UK Sceptics at the time – and since – grasped instantly at a second chance (with 39%) and Netherlands (16%). Ger- scoff at the idea that Germany ever to get their floats away – albeit in both many’s rash of privatisations and stock needed REITs. For a nation weaned cases at the very lower ends of their market listings – mainly of residential over 50 years on the comforting notion price ranges – testifies to the attraction property companies – together with soar- of a thriving open-ended funds sector of the stock market as an exit strategy ing property values, have transformed delivering an annual 4%, it was surely for owners. All the more so as - despite the landscape internally. Five mid-sized enough to have a broad array of prod- sporadic attacks of nerves - the overall companies are listed in the MDAX, mak- ucts into which the punter could invest climate for German companies remains ing up 15% of the index for Germany’s to gain exposure to real estate without so benevolent, and the real estate sec- second division. A further six compa- any of that nasty volatility that comes tor still largely in favour. nies are in the sprightly SDAX, for small- with stock market-listed instruments. Notwithstanding the strong perfor- er enterprises. Various factors affecting REITs had many opponents, the mance of German real estate stocks weighting based on turnover and market most vociferous of whom succesfully over the past three years, the German cap could determine at the end of August ensured that housing – seen as a sa- investing public has for the most part if Deutsche Annington gets promoted to cred cow in the German body politic – stayed away, put off by the traditional the big league – the DAX 30. could never be interfered with by those German aversion to volatility, in favour The problem for many investors is the capitalist running dogs, and would be of the perceived (but often deceiving) differing risk-return profiles between the specifically excluded from any REITs benefits of the smoothed-out returns on stock market and the fund models. Ger- legislation. How ironic, then, that the open- and closed-end funds. For all the mans obviously favour the fund model sector of German real estate that has investment pushing up stocks, fully 95% over stockmarket-listed shares, although most fanned the flames of investor of investors in listed German real estate in the long run the returns on proper- imagination since then has been the are foreigners, an astonishing quota for ty shares are better. Plus, they have the residential sector itself. a first-world nation famed worldwide for advantage of being the most liquid of all That another of Germany’s dwin- its indiginous productivity. forms of property investment, removing a dling trio of REITS seem to be going This leads inevitably to problems further attraction from the fund variant in the way of the dodo is little comfort to – and distortions. Several property the aftermath of the government’s recent those of us who once held a candle for stocks that have shot up like meteors reforms in the sector. the REIT instrument. But while there is over the past eighteen months in Ger- Still, interesting things could happen little chance of a revival in enthusiasm many are traded very thinly. Sobriety, if German institutional investors were for a German REIT, there is also little when it sets in, could be painful. With- to increase their allocation to the listed doubt that ambitious German real es- out a broader investor base across the sector even a little, and take on a little tate companies very much DO see the board, shares are prone to move er- more risk. With sufficient trading volume value in a stock market listing. ratically and react more sensitively to and enough free float, exchange-traded The last three years has seen a economic news or other market ‘noise’, property funds or passive index funds surge of capital-raising on the stock rather than somewhat more mutely as should provide plenty of opportunity for market, whether in the form of new befits the very stable underlying asset even small investors to gain well-diver- listings, rights issues or other forms that is bricks and mortar. Volatility be- sified exposure to German real estate – of capital enlargement for expansion. comes self-fulfilling, and risk-averse in- REITs or no REITs. Never has so much money been raised vestors are drawn elsewhere. Charles Kingston, Editor 5 www.refire-online.com

BGP owns 16,500 apartments located tation would have been expected to raise According to an article in The Aus- across German ‘growth’ markets, with €300m-€500m. The discussions with tralian newspaper, BGP’s chairman Rod about 40% of the units in Berlin. The conwert therefore represent a likely shift McGeoch was quoted as saying that rest are spread across the country, with in strategy in favour of a trade sale. market volatility had shifted the group’s a concentration on university cities such It’s been a rocky road for the investors, thinking away from a market listing – as Cologne, Münster, Munich, Nürem- who ended up holding the BGP units after possibly in September - as an exit, in fa- berg, Kiel and Bremen. BGP’s parent GPT hived off its European property hold- vour of a trade sale. McGeoch said BGP company in Australia had been looking at ings in 2009 from an ill-fated partnership would only sell the portfolio for more than a possible IPO in Germany as an exit for with failed Australian investment bank its net asset value of about €700m, and its 58,000 Australian investors, most of Babcock & Brown. At one point BGP’s 58 trade buyers had signed confidenti- whom are thought to be small investors. portfolio was value at nearly €4bn - with ality agreements to look at the portfolio. Last year BGP engaged boutique properties ranging from shopping centres According to Till Schmiedeknecht, house Lazard to advise on its options in Spain and real estate in Sweden, Hol- the head of subsidiary BGP Asset Man- and Credit Suisse and JPMorgan were land, France, Lithuania and Germany - al- agement, it had become increasingly subsequently ¬appointed to work on a though this had shrunk to €2.3bn by 2009 difficult to give a clear profile to the port- potential float, along with BNP Paribas after radical restructuring under manag- folio to make it attractive to Australian and Germany’s Berenberg Bank. A flo- ing director Mark Dunstan. institutional investors. Over the last four

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years the remaining properties in the prises 52,500 m2 of office, retail and res- Germany/Retail Real Estate portfolio have been streamlined, rents idential space, covering a full city block. Record first half for German increased (by up to 20% per sqm), va- The asset was previously called Quartier retail at nearly €10bn cancies lowered (from 9% to 6.1%) and 205 before being rebranded as The Q in tenant fluctuations stabilised. Many as- 2011. The Q encompasses 32,000 sq.m. New figures just in from property brokers sets had been converted from office use office and 17,000 sq.m. retail space, lo- CBRE confirm that foreign investor inter- to student accomodation, or otherwise cated in the heart of the German capital est in German retail real estate remains modernised, so the portfolio would be between Friedrichstrasse and the Gen- undimmed. Compared to last year’s first attractive to several buyers. darmenmarkt. Its current occupancy rate half, total investment volume in German In April, conwert shareholders reject- is 90%, and major office and retail tenants retail more than doubled in the first six ed an offer by Deutsche Wohnen AG to include Coca Cola, Citigroup, AT Kear- months to €9.8bn – fuelled by foreign in- buy its portfolio of 30,000 German and ney, Gucci and H&M. vestors, at over two-thirds of the volume, Austrian housing units for €980m. It had been known to be on the market nearly twice as much as last year’s 36% for several months, with JLL and CBRE share. both involved in brokering a deal with Despite a shortage of supply of prop- Germany/Acquisitions suitable buyers. Several bidders had ex- erties, CBRE says it nonetheless expects Tishman re-buys landmark pressed an interest, but a report in trade full-year figures to top €15bn. Berlin property for €335m journal Immobilien Zeitung suggested that According to Jan Poppinga, CBRE’s the speed with which Tishman Speyer head of retail investment, Germany’s Tishman Speyer’s commitment to Ger- could conduct their own due diligence broad structure is playing into investors’ many, and indeed Berlin, go back a long (four weeks) on the property gave them hands at the moment. “Due to its federal way. In the early 1990’s the company the edge in beating off the competition, structure, Germany offers a multitude of partnered up with Sony Corp. to devel- although their bid was not actually the interesting investment locations outside op the Japanese electronics company’s highest. In the end Tishman and the Span- the large centres, which are increasingly flagship European headquarters at Pots- ish owners agreed on the deal in principal on investors’ as well as retailers’radar,” damer Platz, before selling the 130,000 amongst themselves, said the journal. he said. The top five cities still saw in- sqm property. It continued to develop a The co-CEOs of Tishman Speyer, Jer- vestment rising 57% to €1.8bn. number of major office towers, mainly ry and Rob Speyer, said: “We are thrilled A couple of major transactions do dis- in Frankfurt, over the following to once again be in tort the figures somewhat. Of the total, years. ownership of Quart- high street retail accounted for 38% of Another Berlin development ier 205, a building the overall total, largely due to the take- in the early 1990’s was the that we originally over by Canada’s Hudson’s Bay Com- mixed use Quartier 205 (“The Q”) developed to serve pany of the Kaufhof department store (pictured) which Tishman sold as a dynamic mixed- chain from Metro AG. That deal includes in 2007 for €275m to Spanish use experience 43 buildings that Hudson’s Bay sold on private bank Banif and Ponte comprising working, to a joint venture with US REIT Simon Gadea, the investment vehicle living and shopping Property Group. Swiss Corestate also of Spanish fashion magnate Amancio in the historical centre of Berlin. This ac- bought 35 assets in mid-sized cities. Ortega, the founder of the Zara chain. quisition also constitutes our re-engage- “This transaction represents the trend Last month Tishman Speyer bought the ment with the Berlin real estate market that investors – principally due to a lack property back after eight years for a price where we began over 25 years ago, and of product in investment centres – are in- reported to be €335m in a share deal. Ber- we look forward to widening our presence creasingly engaging in B-cities with high- lin Hyp provided the financing, and the in this vital city in the years to come.” er risk-adjusted returns,” said Poppinga. deal was said to have been concluded Tishman Speyer recently presented its Shopping centres took up 29% of within four weeks. The price represent a designs for the 45-story mixed-use tower total, driven by French Klépierre’s Co- multiple of 21.5 times annual rental income that it’s developing on the former Met- rio takeover that included five German Designed by Oswald Mathias Ungers, zler bank site at Grosse Gallusstrasse malls. Canadian pension fund CPPIB the US firm originally developed and built in Frankfurt for its newest European val- also took a 46.1% share in mall devel- the property following the fall of the Berlin ue-add fund. It currently has a German oper and operator mfi from the Fran- Wall. It was completed in 1995 and com- portfolio of just over 200,000 sqm. co-Dutch Unibail-Rodamco. 7 www.refire-online.com

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The share of retail warehouses re- units traded doubled from 124,500 in the Wolfsburg, Freiburg and Heidelberg. mained stable at 29%, mostly part of first half of 2014 to 269,400. The number ‘Due to the supply shortage, invest- portfolio deals. Augsburg-based Patrizia of transactions rose by 23% from 150 ment activity remains high in secondary Immobilien bought three portfolios for last year to 185. The average unit price locations of prime cities and goes hand €286m from Fortress subsidiary Euro- increased by 12.3% from €56,700 to in hand with a growing risk appetite castle, and US hedge fund Marathon €63,660.” among buyers,’ Mergen said. bought 61 discounters and supermar- Deutsche Annington’s €8bn takeover Interestingly, an analysis of all trans- kets from Brookfield. of its rival Gagfah in Germany’s largest actions in H1 2015 shows that one res- The most active buyer group in the ever real estate acquisition accounted idential unit cost almost €63,660 on first half were listed property companies, for a large chunk of the 143.3% year-on- average and has therefore risen in price responsible for almost half. International year increase. Deutsche Annington was by 12.3% since the first half of 2014 (H1 investors took 72% of deals, significantly also involved in the second-largest deal 2014: €56,700 /residential unit). Future above 1H14’s 47%. Investors from Can- over the period, acquiring the €1.9bn price increases will continue to be fuelled ada and France led the field. According Südewo portfolio from a consortium led by the ongoing shortage of supply par- to Jan Linsin, CBRE’s head of research, by Patrizia Immobilien. ticularly in the prime locations, say the “We are watching an increasing trend The third-largest deal was Adler Real researchers. towards corporate takeovers and par- Estate’s takeover of Westgrund in a Listed property companies and REITs ticipations in order to get at sought-af- deal worth €800m. Patrizia was again in- dominated the market, accounting for ter retail property, and to fulfil envisioned volved in the fourth largest deal, to buy nearly three-quarters of activity on the property quotas.” a portfolio from a Scandinavian property purchase (72.9%) and sales (€74.3%) Given the high level of demand, it’s fund for just under €800m. These four side. Non-listed property companies not surprising that net initial yields remain deals together accounted for 67.1% or were involved in 7.6% of purchases, under pressure. The CBRE figures show €11.5bn of the overall volume. while asset managers and fund manag- that prime mall yields in the top markets Stefan Mergen, managing partner for ers accounted for 11.4% of sales. fell by 20bps to 4.3%. Average net initial valuation and research, said NAI apollo German buyers, led by Deutsche yield for high street assets in the Top Five expected market activity to remain high Annington, increased their share of the cities is 26bps below 1H14 at 3.86%. in the second half of the year as buyers market to 89%, or €15.3 bn. “All large Malls in secondary locations are posting compete for a limited supply of stock. deals, which had a significant impact on a 5% yield, while modern retail centres Prevailing high prices could encourage the first half of the year, were carried out yield 5.4% aross the country as a whole. some investors to exit the market, but by German investors,’ said Kanzler. ‘It is there will be plenty of demand for their therefore hardly surprising that German assets. buyers increased their share of the over- Germany/Residential ‘At the same time, further company all transaction volume by 8.8 percentage German residential market acquisitions are possible,’ he said. ‘The points year-on-year.” International buy- hits record €17bn in first half willingness to invest remains high. The ers were responsible for an 11% share larger listed companies in particular are or €1.9 billion. It’s not just Germany’s retail real estate on the lookout for investment opportuni- sector that is hitting record levels in the ties in order to further expand their mar- first half of the year. Research figures in ket presence.’ Germany/Asset Management from advisory group NAI apollo show Mergen said the transaction volume German asset managers more that investment in Germany’s residential for the year would almost certainly break optimistic in 2014 ranking portfolio market posted record half-yearly the €20bn mark and could even pass figures of €17.2bn in the first six months €25bn if current market conditions are Every year the Cologne-based Bell Man- of 2015, more than double the volume sustained. agement Consultants produce their an- for the same period in 2014 – and higher Over the first half, Berlin cemented its nual ranking of Germany’s top real estate even than any full-year result since 2006. position as market leader, with 22.2% of asset management companies. This year According to Dr. Konrad Kanzler, all transactions in Germany taking place has seen a number of changes at or near head of market research at NAI apollo, in the capital, up from 16.7% in H1 2014. the top as big portfolio investors with “Due to company takeovers and large in- Second-tier cities also saw strong activ- their own in-house asset management dividual deals, the number of residential ity, including Magdeburg, Delmenhorst, capacities feature more prominently.

...see page 12 9 www.refire-online.com

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Heading the 2014 list is ECE Projek- client offering. As the table shows, many year. The big growth is expected to come tmanagement, followed by long-time provide asset management services from foreign investors and German insti- leader Corpus Sireo, then Bilfinger, mainly for their own company owned as- tutional investors – 86% of managers are Patrizia Immobilien, IC Asset Manage- sets, whereas others are more focused already dealing with foreign clients and ment, and Acrest Property Group. (See on acquiring mandates from third parties. 75% with German institutions. Not sur- table below for Top 20 Asset Managers). Despite the difficulties of comparing prisingly, public-sector institutions, along The Bell ranking is not the only study like with like, the Bell ranking has come with banks, have seen their share of the on the market place, as Bad Hom- to be seen as definitive in Germany, and market slide steadily over the years, and burg-based FERI also produce a report is now in its sixth edition. For the latest this year is no exception. every two years, although that study is survey a record 38 companies respond- 55% of respondents conceded that more focused on companies that operate ed to the comprehensive questionnaire their hopes of profiting from the non-per- and manage their own funds, which ex- detailing the extent of their services, fee forming portfolio sector had proved opti- cludes many of the ‘pure servicers’ that structures and client preferences. mistic. By contrast, 63% of respondents feature prominently in the Bell ranking. According to Peter Brieger, senior expect that corporate real estate holders The big difficulty in producing a mean- analyst at Bell Management Consultants, are increasingly likely to outsource cer- ingful ranking, of course, is that very few the 2015 survey highlights increased op- tain asset management functions to spe- asset managers are directly comparable timism among respondents about the cialists – well up on last year’s 38%. Only with each other. They would argue that state of their industry. 86% of those sur- 20% believe that their business with cor- they provide different services, have dif- veyed see growth in the market for their porates is likely to decrease in the future, ferent specialities, and are unique in their management services, up from 77% last down from last year’s 34%.

The largest Asset Management Provider by assets under management

aum 2014 total aum 2014 non-captive position AM-Provider in mill. € in mill. € 1 ECE Projektmanagement G.m.b.H. & Co. KG 18.300 12.810 2 CORPUS SIREO Investment & Asset Management GmbH 16.000 15.520 3 Bilfinger Real Estate Asset Management GmbH 14.134 14.134 4 PATRIZIA Immobilien AG 10.700 214 5 IC Asset Management GmbH 8.800 k.A. 6 Acrest Property Group GmbH 5.442 5.442 7 HIH Real Estate GmbH 4.400 4.400 8 POLARES Real Estate Asset Management GmbH 3.800 3.800 9 CR Investment Management GmbH 3.510 3.510 10 HAHN Fonds und Asset Management GmbH 2.400 240 11 Jones Lang LaSalle GmbH 2.100 2.100 12 F&C REIT Asset Management GmbH & Co. KG 1.750 963 13 Estama Gesellschaft für Real Estate mbH 1.720 1.393 14 Art-Invest Real Estate Management GmbH & Co. KG 1.640 262 15 BLUE Asset Management GmbH 1.425 1.425 16 BECKEN Holding GmbH 1.350 945 17 VÖLKEL COMPANY Asset Management GmbH & Co. KG 1.340 1.340 18 HGA Real Estate GmbH 1.200 1.110 19 Garbe Logistic AG 1.100 495 20 Cordea Savills GmbH 1.061 605

0 Real Estate Asset Management Report © Bell Management Consultants 12

...from page 8

Germany/Retail Real Estate have naturally area of about 32,000 “Fachmarktzentren” bidding come under pres- sqm from British in- more competitive as institu- sure, falling below vestment partnership tions seek more yield 4% in many of Sterling Develop- Germany’s biggest ments. The shopping REFIRE has recently been talking with cities in the mean- and retail parks are lo- several specialist investors in German time. If a shopping cated in different cities neighbourhood shopping malls, or so- centre is now yielding 4.4% at peak, in Bavaria, Baden-Wuerttemberg, North called “Fachmarktzentren”, to get a better somewhat lower than back in 2007, then Rhine-Westphalia, Hesse and Lower idea of why new investors are moving high-quality Fachmarktzentren can gen- Saxony and are rented to anchor tenants into this asset class – which they appear erate 5.5%, with individual stores offer- like Rewe, netto, Aldi, Lidl and KiK. to be, in ever larger numbers. ing yields of 5.8%. We recently visited the company GPEP A recent report published by the In the boom years, many foreign inves- in Frankfurt, a specialist investor and as- Munich-based closed-end fund initia- tors plunged into the sector and overpaid set manager focused on retail properties. tor KGAL puts the level of commercial to get their hands on any retail assets The company currently manages over 180 property transactions in Germany in Q1 they could, often without a clear concept properties with 300,000+ sqm of lettable at €9.5bn, or about €0.5bn less than in of how they would manage the properties space and 500 tenants, on behalf of cli- the same quarter last year. Still very solid at a local level. The result was a bonanza ents such as GE Real Estate, Allied Irish figures, although the emphasis has shift- for the lawyers and the special servicers Banks, and Frankfurt-based fund initiator ed slightly in the first six months to the who have been living from the pickings Universal Investment. German residential and retail property of the carcasses for the last years as the In July GPEP bought a portfolio of markets, which are breaking all records. original buyers exit the market. 10 Lidl food discount markets, acting Within the retail asset category, one Old hands like investment manag- as portfolio manager for a Universal highlight is the growth in the segment er Värde, with earlier experience of the fund. The assets are mainly located in for neighbourhood shopping centres, or sector, are now selectively returning to Baden-Württemberg and Bavaria. It fol- Fachmarktzentren, which saw transaction the market. It recently bought twelve lowed that up by buying a retail park, in volume jump by 42% to about €1.65bn. shopping and retail parks (known as the Bodolz on Lake Constance, for anoth- 143_RZ_With suchRefire_125x87_ohne_2_NEU_REAG demand, overall retail yields 26.02.15Stellar 18:49 portfolio Seite )1 with a total lettable er Universal special fund. The anchor tenants are Rewe and drugstore Ross- mann, with leases of 10 years. The three partners at GPEP – Marcel Professional Excellence Fuhr, Jochen Friedrich and Herwart Reip – bring an eclectic mix of capital markets and retail asset management REAG is an independent consultancy specialising in real estate. Our professional team in experience to the sector. They point Europe provides services to national and international clients primarily in the following fields: to the several billions of euros worth of • Appraisal (ImmoWertV, BelWertV, Red Book, IFRS) retail centres and retail parks that the • Investment Advisory banks are currently looking to sell from (Document DD/management, distressed portfolio consultancy) the old foreign-held portfolios. • Transaction Services Part of the attraction, if the investor • Asset Management Support can identify high-quality properties, is the • Technical Services (Technical DD, Project Monitoring) ever more restrictive granting of building • Environmental Due Diligence permits by local authorities – pushing Represented in Berlin, Frankfurt, Hamburg, Bremen, up the values of existing properties in Cologne, Munich, London and Paris please call: attractive locations. The total market of REAG GmbH Real Estate Advisory Group Germany Bockenheimer Landstraße 22, 60323 Frankfurt/Main potential assets, thanks to Germany’s Tel. +49(0)6924752670 decentralised geography, amounts to [email protected] www.reag-aa.com 30,000 discount food retailers and full- range providers, giving investors good scope for diversification. 13 www.refire-online.com

THE HIDDEN CHAMPION: GERMAN CORPORATE REAL ESTATE

multi-tenant occupation and can also to unlock additional value-add po- be used for other purposes. tential with the sale and subsequent lease-back of real estate holdings. Despite the considerable value of corporate real estate holdings, which Particularly in the field of company at ten percent constitute a major item pension schemes, the contribution of fixed assets, and also despite the to corporate real estate can perma- extremely strong investor demand for nently resolve significant financing this asset class, German companies shortages in the current climate of are somewhat reluctant to sell real low interest rates, thus ensuring estate holdings used for business that existing resources can be used purposes. According to estimates, 70 more efficiently. Cash flows can be percent of real estate used by com- adjusted to the obligations by way panies are owned by the companies of individual structuring of indexing

Author: themselves. agreements, graduated rents and the tenancy agreements in the company Sandra Tewes The sale of these properties would pension scheme. Additional resources Executive Director, CORPUS SIREO Asset Management provide a range of advantages for can thus be avoided, and the property Commercial GmbH the companies: The current market value can be significantly enhanced climate offers numerous opportuni- by means of professional asset ma- ties specifically for streamlining and nagement. In conjunction with Swiss The German commercial real estate optimising portfolios. Aging real Life Asset Managers and Schweizer market is still booming - sales of estate portfolios in particular require Leben Pensionsmanagement, Corpus commercial real estate amounted to investments in the existing proper- Sireo, as a unique selling point, has approximately 40 billion euros in ties; this situation is exacerbated established a comprehensive position 2014, a level not seen since 2007. further by increasing user require- in Germany for institutional clients However, the resurgence in the wil- ments for greater flexibility. Flexible for structuring company pension lingness of national and international tenancy agreements may have a scheme properties. investors to purchase real estate has positive impact on strategic decisi- simultaneously been accompanied by ons, particularly as companies which Contact: a huge decline in the availability of operate profitably are interested in investment properties in traditional unlocking tied-up capital and gaining CORPUS SIREO Asset Management market segments. As a result of the access to the associated increase in Commercial GmbH investment pressure, investors are liquidity. By means of external rental increasingly focusing on alternative arrangements, companies are also Sandra Tewes asset classes, including corporate real able to reduce costs, professionally Client Group Leader Corporates estate. This is defined as commercial manage holdings and unlock admi- [email protected] property used for business purposes, nistrative resources. Property sales which generally comprise several also provide capital for a company‘s For further information go to types of use and are suitable for core business and companies are able www.corpussireo.com/amc

Sponsored Statement 14

...from page 12

Further attractions of the sector, they tionals hunting for yield, and not finding it around for suitable acquisition, and the point out, are low vacancy rates, long- any more in the classical ‘core’ markets. Chinese group Jin Jang Hotels have term leases, a limited number of quality bought the French Louvre Hotels. There locations, and low and highly predictable is a lot of movement in the sector. management and maintenance costs. Germany/Hotels Now US investor Carlyle is reported GPEP says that, with 100% equity Carlyle latest investor to put to have mandated investment bank Mor- backing, and based on a conservative hotels on the block gan Stanley to handle the sale or public approach with a little bit of opportunistic listing of its B&B Hotels chain, aiming spice thrown in, yields of 5% to 6% are With interest in German hotels at unprec- to raise about €1bn and conclude the realistic. With leverage of 50%, the yield edented levels, numerous investors have sale by autumn of this year. Apart from can be increased to 8% to 9%, giving been bringing in the consultants to re- the operating business, Carlyle has al- distributions of 5.25-6.25% annually. view what they are doing – or should be ready been selling off some of the ho- Bidding in the retail sector in Germany doing – with their hotel assets. tels it owns in the group, most recently has always been competitive, and GPEP We reported in these pages last 22 units to the French investor Foncière believe it’s getting even more competi- month how traditional German brewery des Murs. tive as the traditional opportunists drawn group Warsteiner was evaluating a po- Carlyle owns 80% of the group, hav- to the comparatively higher returns in the tential sale of its Welcome Hotels chain, ing bought it in 2010 from listed French specialist Fachmarktzentrum market are with 17 three- and four-star hotels across investment group Eurazeo for €480m now being joined by traditional institu- Germany. Asian investors are looking and expanded it from 223 to 340 hotels.

YOUR GATEWAY TO GERMAN REAL ESTATE

MORE THAN 15 YEARS TRACK RECORD IN HIGH YIELD REAL ESTATE INVESTMENTS IN GERMANY BORIS HARDI PRINCIPAL CONSULTING OFFERS:

• Market-insight and deal-fronting for international buyers in Germany • Commercial real estate sales in Germany • International landlord representation in Germany • Identifi cation, asset underwriting and management of asset managers • Forward-deals and off-market acquistions for foreign investors • Commercial real estate offerings of single assets >20 Mio. Euros and portfolios >100 Mio. Euros • Client representation at banks‘ and real estate institutions‘ senior level

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Eurazeo in turn had paid €471m 2007 for transaction volume of more than €3bn, deals), high net worth individuals or fam- the chain. It currently operates budget if sentiment continues, says Ursula ily offices (5) and private equity investors hotels across Germany, Italy, Morocco, Kriegl, Head of Hotels and Hospitality (3). The ten largest single deals took up Poland, Portugal and the Netherlands. at JLL. Her division has registered 34 €560m of total and included the sale of Germany has seen the fastest transactions, double last the Roomers hotel project in Munich to growth, with a doubling of hotels to year’s first half, with the US REIT W.P. Carey for €70m, and the 75, while revenue in Germany has average deal sizy being Adina Apartmenthotel in Hamburg for jumped from €40m in 2010 to its €27m. “Last year’s re- €50m to Commerz Real. current €92.5m. C cord is close at hand,” German investors have been to the Launched 25 years ago in Britta- she says. “The number fore, responsible for two-thirds of ho- ny, France, the B&B chain has es- of transactions is re- tel deals, worth €555m, followed by US tablished itself at the upper end of markable… Never be- (€100m) and UK investors (€80m). Port- the budget hotel segment, serving busi- fore have so many hotel assets (in single folio transactions fell to €560m from ness and leisure travellers. transactions) changed owners in a first €890m in 1H14. The largest deal was the Germany has seen a surge in ho- half.” sale of 18 Accor Hotels for an estimated tel transactions this year, with volume The key driver, of course, is the mass €150m to German Event Hotelgruppe. rising sharply by 10% over last year to of capital available for investment, look- Geographically, Germany’s Big 7 cit- reach €1.48bn for the first six months, ing for a safe home with a decent return. ies made up €910m or 60% of the trans- more than double the ten-year average Of those buying, institutional investors action volume. About €600m went into of €646m, according to property broker have been the most active buyer group, secondary locations, where the average JLL. responsible for 14 single deals worth deal size was understandably much low- €2015 could be a record year, with €440m, followed by hotel operators (7 er, at €8.7m per transaction.

Prelios Immobilien Management – THE SPECIALIST FOR YOUR COMMERCIAL REAL ESTATE

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Germany/Retail Real Estate Frau Klaussner said that GRR is also pan-European portfolio with tranches in Retail specialist GRR launch- taking advantage of the buoyant market various currencies. es second fund, targeting to lighten up on some improved assets Aareal Bank had arranged and under- food sector from its own holdings, to re-invest else- written an initial €530m, seven-year se- where. It recently sold a 21-property nior facility to Northstar. The bank said GRR Real Estate Management, the portfolio with 41,000 sqm to an interna- the loan had been increased to €630m, Nuremberg-based fund and asset man- tional investor for €55m, after improving taking the facility’s loan-to-value ratio to ager specialising in ‘basic retail’ real es- the quality of the assets, located across 57%. tate, has had a busy few months as both Germany. “Among other things we were Roland Fuchs, head of finance at Alli- an active buyer and seller. able to renew existing contracts with anz Real Estate, said the deal was in line The company, which recently moved leading retailers such as EDEKA or with Allianz’s growth and diversification up the road from Erlangen to Nurem- Rewe and extend the agreement with strategy. “Our cooperation with Aareal berg after growing out of its old offices, WALT to seven years”, said Klaussner. Bank has been successful, in particular has been managing its own funds since GRR manages more than 300 individ- with regard to structuring and documen- 2012, offering investors a full-service ual assets with 670,000 sqm of lettable tation requirements specific to the insur- package including fund conception, fund space spread across Germany, valued at ance industry”, he said. raising and ongoing fund management more than €1bn. Aareal’s Christian Schmid, head of – all in its special area of basic retail, business and syndication, commented, including numerous Fachmarktzentren Germany/Financing “This syndication is another milestone in (see preceding article in this issue). Allianz joins Aareal in taking Aareal Bank’s cooperation with leading The company has just established bulk of lending on NorthStar insurance companies such as Allianz. At its second fund, German Retail Fund deal the same time, it reflects our aim to win Nr. 2, likewise a Spezialfonds under the over and establish institutional investors auspices of the German KAGB (German US REIT NorthStar Realty Finance as syndicate partners, alongside banks.” Investment Act). Targeted at instituional Corp. has been in the news for several The SEB portfolio that was sold had investors, the fund will invest in German sizeable deals recently, including its re- 11 office buildings located in Brussels, retail properties anchored by food retail- cent acquisition of the landmark office Hamburg, Paris, London, Milan, Amster- ers as with its predecessor fund, Ger- property Trianon in the Frankfurt busi- dam, Rotterdam and Gothenburg. man Retail Fund Nr. 1, which has equity ness district for €540m. Last year it hit NorthStar followed up its big invest- capital of €174m and is fully placed. the headlines for its ment from SEB with a further portfolio Fund Nr. 2 is aiming for a volume purchase for €1.1bn of deal in January this year, when it bought of €300m within three years, spread a portfolio of 11 offic- the Trias portfolio with 37 assets from over 50-60 separate assets in core/ es properties sold out German insurance company Provinzial core-plus, housing a mix of busi- of the liquidating SEB NordWest. This included 30 office build- ness models, retail groups and geo- Asset Management ings, four retail assets, two hotels and graphic spreads, and balancing high open-ended fund. an industrial property with 260,000 sqm, WALTs with stable cash flow. Food The SEB deal was and likewise scattered across Europe – in retailers should provide 70% of the significant for highlight- Frankfurt, Paris, London, Berlin, Madrid, rental income, and individual assets ing the evolving collab- Lisbon and Glasgow. will be between €2m and €20m. GRR oration between insur- expects an average distribution yield of ance companies and traditional bank more than 6% annually. lenders in large-scale financing projects. Germany/Retail Real Estate GRR’s battle-hardened CEO Su- Insurance giant Allianz Real Estate Cerberus engages UBS to sanne Klaussner (pictured, right), re- said recently that it had provided €365m sell off German retail assets cently named “Manager of the Year” in as part of a €630m senior financing fa- the German real estate industry by her cility underwritten by Wiesbaden-based Private equity group Cerberus has hired peers, said of her group’s second fund, Aareal Bank against the 186,000 sqm UBS to find a buyer for its German cash “Here we are offering a further chance for portfolio. Apart from being one of the & carry markets after abandoning its orig- investors to access sustainable invest- largest syndicated loans between a bank inal plan to list its retail division through ments in the ‘Basic Retail’ sector. The and an institutional investor in Europe, it an IPO. The assets, many of which are success of our first Fund shows that the is also probably the biggest real estate wholesale markets leased to Metro, are combination of long-term lease agree- financing deal by any German - insur thought to be worth up to €1bn. ments with creditworthy anchor tenants ance company. For Allianz it is also the Buyers such as retail funds from Eu- is in demand by the market.” first time it is financing a cross-border, rope and Asia are thought likely to be the 18

...from page 17 prime targets for the sale. To date the as- biggest buyer of loan sales in Europe, ac- They were followed by the Deutsche sets have been managed by third party cording to a recent report by Cushman & Bank and Apollo partnership in second retail asset manager Acrest. Wakefield. place at €3.2bn following their Perma- Cerberus has been actively investing Cerberus accounted for €5.6bn of nent TSB purchases earlier in the year. in Germany since 2002, in both retail and sales over the period, or 24% of all Meanwhile Lone Star has climbed to residential. In 2012 the group bought the closed sales in H1 2015 after completing third place after its purchase of the 300,000 sqm Rebound portfolio of 47 re- the Capital Homes Loans deal valued at Project Parrot NPLs. In total Lone Star tail and mixed-use properties from FMS €3.5bn. invested €1.6bn in loan sales over the Wertmanagement, the winding-up bank Cerberus was also the biggest inves- period. of Hypo Real Estate, and has been re- tor in European non-performing loans US firms continue to dominate the list developing them, while in 2011 it bought last year, according to Cushman & Wake- of the top 10 investors. JP Morgan ranks 900,000 sqm of Metro Cash & Carry field. Cerberus affiliates invested around fourth with €1.4bn, followed by Oaktree wholesale-retail properties located in ur- €17.7bn in European NPLs in 2014, buy- Capital (€1.3bn), Fortress/Eurocastle ban centres throughout Germany. ing up about 20 European portfolios and (€1.2bn), Sankaty (€1bn), Blackstone Meanwhile, in sub-performing and accounting for 22% of all closed com- (€950m), and Goldman Sachs (€754m). non-performing loans Cerberus Capital mercial real estate and real estate-owned The Hamburg-based family enterprise - Management has again emerged as the transactions. Otto Group - ranked 10th with €650m.

Guest Column: Richard Weller, Head of Facility Management Consulting VALTEQ GmbH Contracting in the hotel industry – what nonsense!?

Accounting for a proportion of up to However, if we disregard disinterest seven percent of operating revenues as a factor, the only issues that remain in the hotel industry, energy costs are all solvable. And if clarity prevails represent a not inconsiderable cost over the solvability of these issues, item. In these times of social and even disinterest would have to give way entrepreneurial responsibility of business to great curiosity – after all, these are customers, as well as private individuals, ultimately issues that indeed demand almost all hotel operators now recognise somewhat more concentrated attention. www.valteq.de the importance of sustainability and Of course, appropriate information events, “green paint”, even if these topics are seminars, congresses and specialist structure, the ownership and lease frequently only rolled out for marketing forums can all contribute to providing conditions, or organisational requirements. purposes and not actually lived. Yet the clarification. For me, however, it is still very But are the issues always being given the objective here is to kill two birds with one surprising and disappointing to discover scrupulous attention they need? Or do the stone: To truly and demonstrably live the that information events, such as on the responsible players have a tendency principles of sustainability and, with the topic of “Contracting in the hotel industry”, to incorporate sweeping assumptions aid of intelligent, low-risk implementation whilst attracting good numbers of into the decision, such as “it doesn’t and contract models, to implement participants, are essentially only attended work anyway; and everyone knows it”, or efficiency-boosting and, ultimately, cost- by consultants, engineers and contractors; “everything’s already running efficiently reducing measures! the hotel managers and responsible in my house”, or “just another excuse for But: What is behind the reluctance in the department heads are generally very someone to take my money”, and so on. hotel industry? conspicuous by their absence. The level In the interests of sustainability and Are hotel managers not interested in of suffering has evidently yet to reach the cost-efficiency in the hotel industry, I these subjects? Could it perhaps be point at which one begins to tackle these can only call upon those responsible for down to unawareness or uncertainty? Is issues as an instrument to help boost the hotels to occupy themselves with these it the complex systems that are too off- profitability of a hotel. issues with greater intensity and, turning putting? Or are there even tax or legal It is clear, of course, that not every hotel to those in politics, to adjust or remove restrictions standing in the way of such is suitable for contracting solutions or any existing hurdles. This is the only way considerations? I feel certain it is due to a alternative implementation models, possible for well-marketed sustainability combination of the reasons given above. whether because of the utilisation to be truly lived in the hotel industry!

Sponsored Statement 19 www.refire-online.com

KRIEGER R EAL ESTATE M ANAGEMENT

AUDITOR· TAX A DVISOR· ATTORNEY Germany/REITs FRANKFURT AM MAIN · LAMPERTHEIM · BERLIN DEMIRE takeover of Fair Value REIT immi- nent in wave of consolidation

It looks like Germany’s small and rapidly-shrinking roster of approved REITs is about to lose another member, as its sec- ond-ever REIT, Fair Value REIT-AG, is about to be swallowed up by the larger DEMIRE Deutsche Mittelstand Real Estate AG. With Alstria Office REIT taking over DO Deutsche Of- fice, the wave of consolidation sweeping the industry looks like all but wiping out Germany’s remaining REIT sector. The Frankfurt-based Demire, known in a previous incar- nation as Magnat Real Estate, has made a voluntary public takeover offer for Fair Value, which if successful would create a real estate group with a portfolio of about €1bn. The take- over would be funded by a capital increase and share swap, with Fair Value shareholders receiving two Demire shares for every one Fair Value share they own. 23% of the voting shares in Fair Value, owned by ex-TAG Immobilien CEO Rolf Elgeti’s (pictured, below) Obotritia Cap- ital and Fair Value supervisory board member Oscar Kienzle, have already given their commitment to the takeover. Demire need a minimum quorum of 50.1% of the Fair Value voting rights for success, and their offer of two-for-one in shares has seen the Fair Value share price jump up sharply. Nonetheless Fair Value shareholders would still be receiving a premium of more than 25% on the curent price of about €8.05. It looks as if Fair Value management is also in favour of the deal, and has signed a so-called Business Combination Agreement, a normal precursor to a done deal. The transac- tion would see the merged company hold 175 office, retail and logistics properties worth about €1bn and producing an- nual rent of €77.5m. The goal would be to create “the leading German commercial property specialist focused on second- ary German locations”, according to Demire. Demire has a commercial portfolio of 810,000 sqm of of- fice, logistics and retail properties generating annual rent of €52.2m, having doubled its space and rent-roll over the past year through acquisitions. It pursues a basic buy-and-hold strategy using its own in-house asset, property and facility management. The company has a market cap of €137m fol- lowing a series of recent capital increases. Fair Value is much the smaller partner, with lettable space in its office portfolio of 275,000 sqm. However, its financing is on a stronger footing, paying an average of 2.7% on its 50% borrowings. Demire’s LTV is 81%, and has been paying a much higher interest rate of 5.7% on its loans. 20

Germany/Retail Real Estate Yorker, all on long-term leases. Facili- ing shares, and DO’s major shareholder Danish group ATP buy Bre- ties included a cinema complex, a large Oaktree has already committed its 60% men centre for €212m food court and 4,000 car parking stake to the takeover. spaces, many underground. The deal will consoli- Danish commercial real estate investor Junior partner ECE Projekt- date Alstria’s position as ATP Real Estate has bought the Wa- management GmbH & Co. KG Germany’s biggest office terfront shopping centre in Bremen from will handle the centre manage- company, with a combined vendors Resolution Property and LNC ment of Waterfront. ATP Real Es- market value of €1.7 billion. Property Group for €212m. This is the tate and ECE have partnered up It would add Deutche Office group’s first investment in a shopping before on other projects including properties in Frankurt - with centre outside Denmark, and one of the the shopping centre Rosengård- tenants including Allianz SE largest single direct real estate invest- scenteret in Odense, Denmark, and Deutsche Telekom AG ments ever by a Danish company, in line where ATP Real Estate holds an - to Alstria’s holdings mainly with the company’s strategy to expand ownership interest of 33%. in and around Hamburg, Dusseldorf and outside its home market. Stuttgart. ATP will be a 95% owner of the cen- On a conference call, Alstria’s CEO Ol- tre, while the German Otto family’s ve- Germany/REITs ivier Elamine (pictured) said the merger hicle ECE is taking the remaining 5% Alstria Office REIT gets should boost Alstria’s key FFO measure stake. ATP Real Estate is part of Danish green light for DO Deutsche to 75 cents in 2015, up from its previous pension fund ATP Group. Office takeover forecast of 62 cents. He anticipates cost Michael Nielsen, chief executive at savings of about €2.5m from efficien- ATP Real Estate, said the centre was an The board at Germany’s first REIT, the cy gains and up to €15m annually in fi- “attractive” investment in line with the Hamburg-based Alstria Office REIT AG nancing benefits. He said that Alstria had fund’s strategy to generate long-term has received a resounding ‘yes’ from its secured a bridge loan of up to €1.1bn to income and cash flows by investing in shareholders for the required capital in- address potential change of control provi- properties in good locations and with low crease as a prelude to its announced vol- sions under current loans at DO Deutsche risk. “We have previously announced our untary public takeover offer of fellow-list- Office. While short-term the company’s increased focus on this type of real es- ed DO Deutsche Office AG. An almost LTV ratio would rise to 50%, said Elamine, tate assets in Denmark, clean sweep of Alstria would be renewing efforts to get it as well as international- 99.71% of Alstria back down again to a more comfortable ly,” he said. shareholders vot- 40% in the coming years. Waterfront Bremen ed in favour at a The German office sector is seeing the (pictured, right) opened recent extraordi- highest level of investment since the pre- in September 2008 and nary general meet- crash year of 2007, with investment last Resolution Property ing. year rising by 26% from 2013 to €17bn, subsequently acquired Alstria is issu- according to BNP Paribas Real Estate. a 50% share from LNC ing 68.7mm new Earlier this year DO Deutsche Office in August 2010 as part of a €130m joint shares to effect a capital increase of sold one of its most prestigious but trou- venture. The joint venture has since in- €68.78m which it is offering to DO share- blesome assets as part of its active as- vested significant capex generating holders. This corresponds to 0.381 new set management approach including big further revenue from lease renewals. Alstria shares for each DO share. Further value-added projects. It sold the vacant Footfall in the 44,000 sqm centre has in- details of the takeover offer will be deter- 35,000 Frankfurt Westend Ensemble for creased from 5 million visitors to 8 million mined in the offer document, due out by €82m to fast-growing German developer annually over the period. The centre is the end of August. CG Group, headed by ambitious devel- 6km from Bremen’s downtown close to Should the takeover go through, as oper Christoph Gröner, after years of the Weser river, and with good bus and is likely, the new company will be the trying to find a suitable use or tenants light rail connections. largest pure commercial office investor for the more than 100-year-old previous The centre is fully let with 120 retailers in Germany, with a portfolio valued at headquarters of the Post Office. Half the including such brands as Primark, Me- €3.5bn with leverage. Alstria requires proceeds went to pay off liabilities on the dia Markt, H&M, Intersport, and New acceptance from 69.6% of DO’s vot- property, last valued at €88m.

see page 22 21 www.refire-online.com

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from page 20

CG Group now plan to convert the on the site of the former Cineplexx. Germany/IPOs landmark building to residential and add One of the buildings will reach a height Ado Properties succeeds a 17-storey high-rise in a €260m invest- of 150 metres, making it the highest tow- with IPO on second attempt ment. It plans 203 owner-occupier apart- er block in Europe’s German-speaking ments in the listed building on the site, countries, Corestate said in a statement. We wrote in last month’s issue of RE- a further 60 owner-occupier flats in new “Due to the high share of flats that are FIRE that the Berlin-based Ado Proper- buildings and 219 rental flats in a new either in need of refurbishment or just ties had postponed their planned June residential tower. The newer structures old, and due moreover to the rise in in- IPO given the volatility on stock markets on the site will be demolished. Start of coming migration to Vienna, there is an caused by the Greek crisis. Within three construction is scheduled for 2016, with enormous demand in the city for new weeks the company returned to the mar- completion due in 2019. and modern housing accommodation,” ket and succeeded in getting its flota- said Thomas Landschreiber, Corestate tion away, albeit at the very lowest end Capital’s chief investment officer. of its price spectrum. Ado issued shares Austria/Residential He added: ‘The high number of apart- for €465m, of which a gross €200m will Corestate joins Soravia in ments already reserved at both projects accrue to the company. Trading in the €430m Vienna housing JV ahead of the start of construction sug- shares started on 23rd July. gests as much. These property develop- The company had indicated a previ- Swiss-based private equity group Cor- ments reflect our focus on unique invest- ous targeted range of €20-25, estate Capital is joining forces with ment situations that promise attractive but ultimately placed 22.8 Austrian developer and investment firm rates of return across Europe.’ million shares at €20.00, put- Soravia Group to develop four high-rise Since its founding in 2006, the Zug- ting an effective market capi- buildings in Vienna representing a total based Corestate Capital has invested talisation on the company of investment volume of €432m. more than €2.9bn in direct and indirect about €700m. The shares The plans for the so-called Danube real estate, primarily for family offices have since slid to just below Flats are to realise two distinct ensem- and institutional investors. their launch price. bles offering a total of 1,350 apartments, The family-owned Soravia has com- By listing, ADO Properties gets fast as well as office and commercial units. pleted over 500 projects worth over track inclusion in FTSE EPRA/NARE- The complex will also include concierge €3.3bn in Austria and eastern Europe. IT Global Real Estate Index Series. The services, preschools, gyms and roof-top Last October it opened an office in Mu- company will be included effective from gardens, with completion scheduled for nich to promote Vienna property oppor- 30th July 2015 in the FTSE EPRA/NA- 2019. The project is on the New Danube tunities to German investors. REIT Global Index, FTSE EPRA/NAREIT Developed Europe Index, FTSE EPRA/ NAREIT Germany Index as well as further sub-indices. Ado Properties CEO Rabin Savion (pictured, above) said he was well pleased with the flotation. “We believe that Ado Properties is very well positioned to take advantage of the opportunities on the very strong Berlin housing market. The IPO will certainly help us to continue on our growth course.” Ado currently owns and manages 14,000 residential units, and says it has been able to achieve recent rent rises of 8% annually. Market rents on new leases are considerably higher, it said, so there is strong upward potential. As recently as April, Ado bought 5,750 Berlin apart- ments for €375m from listed Deutsche Germany house price development 23 www.refire-online.com

Wohnen, along with a further 1,300 apart- ed and converted into a retail centre in properties, mainly retail space, offices ments from another unidentified fund. 2014/2015. The centre opened in March and medical centres in key city centre The Tel Aviv-listed Ado Group will 2015. The main tenant with around 4,000 sites in large and mid-sized German cit- continue to own 35% of the Frank- sqm and a 17-year lease is food retailer ies. Rental income last year amounted furt-listed Ado Properties after the IPO, Edeka. In addition, there are also Schuh to €46.82m, while the company earned for which Arbireo Capital acted as pro- Mücke, drugstore Rossmann, discount FFO last year of €24.55m, and booked a cess manager and sole financial adviser. grocer Norma and other smaller tenants net profit of of €17m. in the property. The average remaining term of all leases is 12.5 years, while the Germany/REITs gross initial yield is 6.1%. Germany/Retail Real Estate Hamborner REIT already in- Earlier in July Hamborner raised gross Metro AG bundles 10-asset vesting freshly-raised capital proceeds of €101.6m by placing an ad- hypermarket portfolio into JV ditional 12m shares, raising the share The Duisburg-based Hamborner REIT capital from €50m to €62m. Sharehold- The DAX-listed Metro Group has sold a has wasted little time putting its recent ers subscribed for 71.7% of the shares large chunk of its so-called Socrates port- capital raise to good effect, immeditately offered in the rights issue. The company folio of 10 Real hypermarkets throughout closing on a deal to buy a retail centre in had said it planned to use the proceeds Germany from its property arm to a new Fürth, near Nuremberg, for €31m. principally “to finance acquisitions of ad- joint venture, in which it will retain a 40% The company is buying the Horn- ditional properties in accordance with its stake. The 60% JV partner is Berlin real schuch-Center, a modern retail centre corporate strategy.” estate group Carlton, itself a joint enter- (Fachmarktzentrum) with around 12,000 Hamborner became a REIT in 2010, at prise between Hildesheim-based com- sqm of lettable space in a top city cen- the time the fourth German company to pany group Lüder and Berlin-based Jan tre location. The seller is a Memmingen join the REIT ranks. At the end of Q1 this Wehle. property company. year the company’s portfolio was valued In a statement Metro said, “The objec- The former Marktkauf property was at €745m, with an overall LTV of 43.3%. tive is to sustainably boost and enhance built in 1990 and completely renovat- It focuses on high-yielding commercial the attractiveness and footfall of the retail

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stores that are of strategic importance to the Lichtenberg district. The seller is a egy, we intend to fund the acquisition Real through the gradual renovation and closed-end fund managed by Wealth- through a mix of equity and debt. IRE- development of the properties.” Cap. The company plans a rights issue IT has announced a rights issue to raise Metro re-acquired the assets in 2014 to boost capital by €59m to part-finance gross proceeds of approximately S$88.7 from Israeli group Delek, having previous- the deal. IREIT launched last year with a million. The balance of the funding for ly owned them, after subsequently revis- €222m IPO on the Singapore exchange. the acquisition will be through a bank ing their estimate of the assets’ potential The Berlin property comprises two loan facility, from which it intends to draw with a collaborative partner. The low-mar- fully connected building sections of 8 down a gross amount of approximately gin Real subsidiary of Germany’s largest storeys and 13 storeys, respectively, the €102.0 million.” retail group is currently undergoing a root- company said in a statement. It is locat- IREIT’s gearing ratio will increase from and-branch restructuring programme. ed near the Media Spree area, which is 31.8% to 43.7%, said Poh, which is in line Jürgen Schwarze, Metro Properties’ popular with internet, media with its target of under 45%. CFO, commented, “When we addressed and technology companies. IREIT launched last year the projected resale more closely after IREIT said the key attrac- to provide a gateway for reacquiring the properties, we soon real- tion was the strong princi- wealthy Asian investors to ised just how much potential the individ- pal tenant – Deutsche access European property ual stores offered for increasing attrac- Rentenversicherung Bund markets. The company’s tiveness and value. To achieve optimum (DRB) – a federal pension largest shareholders are leverage of this potential, apart from solid fund and the largest of the Chinese billionaire Tong financing, an experienced project devel- 16 federal pension institu- Jinquan (pictured, left) who oper was also required who contributes tions in Germany, together bought 60% in a private the specialised competence and drive to with “the opportunity for plaement, and Singaporean reposition large-area retail real estate.” rental and value growth in this increas- developer and business parks entrepre- The 10 Real hypermarket assets ingly popular location”. neur Lim Chap Huat, with 19%. Both are in Bremerhaven-Pferdebade, Cas- DRB occupies 98.8% of the property’s will be taking up their allocation in the trop-Rauxel, Gross-Gerau, Darmstadt, total lettable area on a lease expiring in rights issue. Freiburg (Gundelfinger Strasse), Heide- June 2024, with fixed rent increases of nau, Würzburg (Nürnberger Strasse), 2.5% each scheduled for 2019 and 2022. Wetzlar, Raunheim and Wiesbaden The net property income yield is 7.1%. Germany/Acquisitions (Mainzer Strasse). They are all leased The Berlin property brings IREIT’s New platform GEG kicks off long-term to Real. German holdings up to €438m, which in- with €160m Munich assets The Lüder group of companies is a cludes office properties in Munich, Bonn, project developer that operates across Darmstadt and Münster, with a net let- The newly-established German Estate Germany and specialises in the develop- table area of 122,000 sqm. Buying this Group (GEG), the platform created by ment of large-area retail. Prominent recent latest asset in the ‘B’ area of Lichtenberg Frankfurt-based developer and property projects handled along with partner Weh- fits in with the company’s stated strate- manager DIC and the US buyout group le include the Planetencenter in Gabsen, gy of buying A properties in B cities or B KKR, has kicked off its investment pro- Lower Saxony, and the Mainspitze shop- properties in A cities in Germany. gramme by buying two assets in Munich ping centre in Raunheim near Frankfurt. The company said it continues to for a total of €160m. see interesting opportunities in Berlin, For KKR it is the group’s first foray into where demand and supply dynamics are German real estate, although it has been Germany/Listed Companies healthy, the office vacancy rate has fall- involved in other sectors of German in- Singapore’s IREIT boosts en to a 10-year low at 6.3% and rents dustry for more than 15 years, where it German portfolio by 50% have risen by 2.9% p.a. over the past five has more than €3.3bn invested across 15 with Berlin deal years. “Berlin has a growing high tech- different companies. In January this year nology sector, which has been driving it announced its 50-50 joint venture with The Singapore REIT IREIT Global, which the office market in recent years,” said experienced local investment group DIC is purely focused on German real estate, IREIT’s CIO Adina Cooper. Deutsche Immobilien Chancen, which has made its first acquisition in Berlin, As for financing, Choo Boon Poh, has since shifted its operational business paying €144m for an office complex in IREIT’s CFO, said: “As part of our strat- into GEG along with its 40 staff.

see page 26 25 www.refire-online.com

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...from page 24

DIC has experience of other joint alli- tial and also retail, acquiring both exist- and third-party money. ances in Germany in the past, including ing assets and developing new ones. As The first two acquisitions in Munich partnerships with Starwood and Morgan such, we will invest in both core and op- cover both the core and the opportunis- Stanley. However, the new GEG operation portunistic assets, largely in Germany’s tic elements of GEG’s stated strategy. seems to be of a different order of commit- “Big 7”, although we are not limited to Firstly, the ‘core’ Sapporobogen office ment. CEO of GEG Ulrich Höller, who has those markets.” building, across from the Olympia Park, since resigned his position of CEO at DIC, For opportunistic investments and de- was bought from Württembergische described the new venture’s goals: velopments, GEG is targeting returns of Lebensversicherung, a Stuttgart-based “Our aim is to build up an important around 15%. For core assets, the range insurance company, for €90m. It pro- portfolio together within the next few typically is between 4%-6%, Höller said. vides around 27,500 sqm of office space years. We will invest in offices, residen- GEG invests using both its own capital on 11 floors and is almost fully-let to blue-chip tenants, with an average re- maining lease term of six years. The second asset, the Neue Pasinger Mitte, was bought for GEG’s opportu- nistic business from DIC’s 33%-owned part subsidiary DIC Asset for €70m, in a deal financed by BayernLB. Located at Bäckerstrasse in the city’s Pasing dis- trict, it includes a medical centre, tower lOOK Out block and retail building complex along with a vacant plot yet to be developed. FOr new A local development plan for the entire opportunities estate has already been finalised. The medical centre and tower block are to be redeveloped, while the retail building complex will be entirely rebuilt to offer 11,000 sqm including 80 new resi- dential units opposite the highly-popular Pasing Arcaden shopping centre. Construction is scheduled to start in the fall of 2016, and is expected to take around two years to complete.

Europe/Funds ECE €2bn shopping centre invest in fund goes full steam ahead german real estate debt and capital. German investment and retail asset man- ager ECE has raised €740m in equity commitments for its second European shopping centre fund. The Hamburg-based company’s Eu- ropean Prime Shopping Centre Fund II is targeting equity of €850m and plans to invest up to €2bn between now and late-2018. The fund is backed by sover- eign wealth funds, pension funds and in- www.Fap-finance.com surance companies from Europe, the US 27 www.refire-online.com

and Asia. Last year the fund had its first Cartiera, near Pompeii, which ECE said close at €500m, and like its predecessor had achieved a strong market position fund, has also received commitments south of the Gulf of Naples. The 30,000 from the Otto family and ECE employees. sqm property, which opened in 2012, ECE Fund II will continue the invest- is let to 115 tenants, including Italian largely operates its worldwide business ment strategy of ECE Fund I and focus grocery chain Conad, electrical retailer on a franchise basis, said that it saw on acquiring existing European shopping Mediaworld and H&M. Again, ECE Ita- first-half overall commission revenues of centres with value-add potential. It has lia has been managing the property, so €181.7m, up fully 36.5% on the €133.2m just bought its first assets, one in Germa- knows the asset well. booked in the same period last year. ny and the other in Italy. In November the fund will expecting to In the first half-year of 2015, the Engel & It bought the Stern-Center mall in buy Zielone Arkady in the Polish city of By- Völkers Group generated overall commis- downtown Lüdenscheid (North-Rhine dgoszcz, which was developed by ECE. sion revenues of 181.7 million euros. This Westphalia) from Irish investors. The marks a 36.5% in turnover compared to 30,000 sqm centre with 110 retailers over the same period in the previous year (first four floors was opened in 1977, and has Germany/Brokers half-year of 2014: 133.2 million euros). been managed by ECE itself since 1991. Engel & Völkers raises world- Co-CEO Sven Odia said in a state- It is the largest shopping centre in the wide 1H income by 37% ment that the group forecasts further Sauerland region, with a cachement area strong growth for the second half, and of 440,000 inhabitants. The Hamburg-headquartered, up-market plans to recruit a further 2,000 sales It also bought an Italian asset, La brokerage group Engel & Völkers, which advisors, bringing its global workforce

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to over 7,000. The group is active in 39 Germany/Acquisitions Drogeriemarkt. Hkm Management will countries worldwide, with 570 shops and HanseMerkur buys Böblinger remain the centre’s property manager. 65 commercial offices centre in its largest ever deal According to Lutz Wiemer, chair- “Our strong expansion strategy with- man of HanseMerkur Grundvermögen in and outside of Europe is having a pos- Another German insurance company AG, “Among Germany’s over 400 ad- itive impact,” said Odia. This substantial stretching its limbs in the real estate ministrative and urban district councils, growth can be attributed to the healthy market is HanseMerkur, which recent- Böblingen has traditionally been viewed state of the real estate economy and ly closed its largest ever real estate as being among the top 10 in terms of the strong presence of the brand – par- deal by buying the Mercaden shopping its commitment to sustainability issues. ticularly in Germany, Spain, Italy, North centre in the town of Böblingen, near Local economic strength and purchasing America and Switzerland. Stuttgart. The power, combined with this modern and The large-scale expansion of centre was functional retail centre concept, have the network with the addition of only opened proven very persuasive.” new residential property shops last year by The centre will be allocated to one has resulted in a 116% rise in project de- of HanseMerkur’s open-ended funds. revenues in the USA. On the veloper hkm The company was unenthusiastic about Spanish mainland, residential Management discussing the price, other than to say it property shops recorded a 55% AG in a joint was “the biggest ever transaction for the rise in revenues. venture with HanseMerkur Insurance Group.” The company is pushing its Market Pramerica Real Estate Investors. In a further recent transaction, HanseM- Center concept, introduced in 2013. The The shopping center was built on erkur also bought 289 micro-apartments in concept envisages central office spaces the site of the form central bus station Heidelberg from Cologne’s Kreer Group, in the world’s metropolitan and holiday in Böblingen close to the main train sta- for a price of €25m. The apartments, which home hotspots, from which up to 300 tion, and the downtown pedestrian zone. are still under construction, are right beside sales advisors broker high-end residential It houses around 100 shops on 24,400 the main station, and 50% of them have and commercial real estate throughout sqm of sales area; anchor tenants are been leased in advance for 15 years to a the entire metropolitan area or region. Edeka, H&M, K&L Ruppert and Müller local educational establishment. GRAPH-3

Total Return Performance GPR 250 Index (€) 200

150

100

GPR 250 Europe 50

GPR 250 Germany

0 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15

Source: Global Property Research (www.globalpropertyresearch.com), 2015

Page 1 Graph of Total Return Performance of Europe and Germany in Euro currency over the past twelve months Charts courtesy of GPR Global Property Research 29 www.refire-online.com

Europe/Non-listed funds formed better than core (2.47%). Non-listed European funds The GREFI Q1 2015 update covers the see returns fall in Q1 performance of 379 funds with a com- bined NAV of $352bn (compared to 345 Returns for non-listed European vehicles funds at the end of 2014). This difference included in the Global Real Estate Fund in returns in Europe is of some concern is due to the increase in the number of Index (GREFI) fell from 2.50% at end- given the current uncertainty in the euro- funds delivering data in Europe and Asia. 2014 to 1.82% in Q1 2015. zone, but despite this the broader trends The GREFI draws together data from suggest that performance is likely to re- the Asian and European Associations for main positive over the coming months.” Europe/IPOs Investors in Non-listed Real Estate Ve- Overall returns were highest in the Grand City shareholder rais- hicles (ANREV and INREV) and the Na- US, followed by Asia Pacific and then es €320m in Paris IPO tional Council of Real Estate Investment Europe, according to the latest data. Fiduciaries (NCREIF). The US and Asia Pacific have swapped The Cyprus-registered Aroundtown Overall performance remained pos- places since Q4 2014 as a result of per- Property Holdings plc has raised itive, but dipped slightly compared to formance increasing in the former (from €320m in a capital increase following its the end of last year, with the GREFI re- 3.12% to 3.23%) and falling in the latter June IPO on the Paris stock exchange. turning 2.51% overall in Q1 compared (from 3.40% to 2.34%). The discrete holding company is princi- to 2.92% in the previous quarter, INREV However, one-year rolling annual- pally involved in investing in turnaround said in a note. ised returns improved in all three re- assets in Germany through its stakes in Commenting on the data, Ms. Henri gions compared to the last quarter. The listed firms Grand City Properties, Pri- Vuong, INREV director of research and US recorded the largest increase, from mecity and Camelbay, market information said: “The robust 11.81% to 12.74%. The initial listing on Euronext in Paris performance we saw over the course of With a quarterly total return of 2.63%, was carried out in June and the capital 2014 has to an extent carried over into global open-ended funds outperformed increase during the month of July. the first quarter of this year thanks to im- the overall GREFI. For the second quar- The company issued 100m shares at proving returns in the US. The slight fall ter in a row, non-core funds (2.67%) per- a price of €3.20 per share and there is

GRAPH-1

Total Return Performance GPR 250 Index (€) 250

GPR 250 Europe

200 GPR 250 Germany

150

100

50

0 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15

Source: Global Property Research (www.globalpropertyresearch.com), 2015

Page 1 Graph of the total return performance of Europe and Germany in Euro currency over the past five years REFIRE charts courtesy of GPR, Global Property Research 30

now a free float of 24%. The €320m of proceeds will be used to finance the firm’s expansion plans. It also issued a €450m convertible bond in April to fund its growth. Aroundtown has been investing in European real estate since 2004 and holds stakes in several publicly traded sub- sidiaries and affiliates. These include a 34% stake in Grand City Properties, a listed Luxembourg-based specialist in op- portunistic German housing situations; a 56% stake in Pri- mecity Investment, listed in Paris with €700m mainly 4-star hotel property holdings throughout Germany; and Camelbay, a 100% subsidiary which manages €1bn of multi-tenant Ger- man commercial properties. Aroundtown increased net profit more than 200% to €285m in the second quarter, with funds from operations up 124% to €19.5m, mainly due to an improved financing structure and acquisitions. Group assets totalled €4.4bn at end-March.

Germany/Retail Real Estate Deka continues shopping spree with €213m Cologne mall Greenman We reported last month on Frankfurt-based Deka Immobilien’s Investments acquisition of a diversified portfolio of 51 city-centre retail as- Greenman are sector specific investment fund sets in 37 German cities for €700m from D&R Invest, repre- managers. Our sole focus is the German food senting a group of Dutch private investors. It has made a further sizeable acqusitions since then, buy- retailing asset class, Fachmarktzentren. Greenman ing a prime retail asset from a joint venture between LaSalle manage assets with a value of over €250m located Investment Management and the CPPIB – the Canadian across Germany. Our investment strategy delivers: Pension Board – for €213m. • low finance & operational costs The asset, the Hürth Park retail scheme in Hürth, about • high annual rent surpluses 10km south of Cologne, is managed by ECE and has a gross • twice annual investor distributions lettable area of 61,000 sqm with tenants including Saturn, Peek & Cloppenburg, H&M and a multiple-screen cinema. • flexible investment structures LaSalle purchased the shopping centre at end-2010 with • conservative exit models the CPPIB for €157.3m on be- • operational transparency half of a client and invested around €30m in various asset www.greenman.com management initiatives, in- cluding measures to improve For more information about Greenman and our investment priorities please contact a member of our investor relations the tenant mix. CPPIB took an team in our Dublin office on +353 1 647 1121 | enquiry@ 80% stake in the centre, its greenman.com first direct investment in Ger- Premier Benchmark Property LTD., t/a Greenman Investments many, with LaSalle taking 20%. is authorised as an Alternative Investment Fund Manager by the The rent roll at that time was €12.5m. Central Bank of Ireland under the European Union (Alternative Investment Fund Managers) Regulations 2013. Authorisation Deka will add the mall to its open-ended WestInvest InterSe- number C123941. lect fund. Deka Immobilien has investments in 23 countries and had €27 billion of real estate assets of the end of 2014, while Deka Group had roughly €220 billion in assets at end of 2014. Deka Group is the investment arm of Germany’s Sparkassen. 31 www.refire-online.com

Germany/Financing ceeds of the bond placed in June. It has property class as in the US or the UK. At DREF invests first €44m Ger- since added a further 208-unit student €232 million, the investment volume in man student bond proceeds residence in Kiel, with a market value 2014 was the highest recorded to date, of €20m. All the properties are current- up by around 40% year-on-year. Inves- We reported recently in REFIRE how ly being refurbished, so that most stu- tors are attracted by the supply gap for student housing manager Deutsche dents can expect to move in during the German student accomodation – at a Real Estate Funds (DREF) had raised winter semester 2015/16. current 314,000 units for 2.7 million stu- €44m in June through Germany’s first At €232 million, the investment vol- dents. student housing bond issue. ume in 2014 was the highest recorded Over the past 10 years DREF and its The five-year ‘Deutsche Student- to date, up by around 40 percent year- management team say they have devel- en Wohn Bond I’ carries a coupon of on-year. The substantial supply gap oped, financed, modernised and man- 4.675% annually, and was subscribed for student accommodation – 314.000 aged about 2,500 student residence to by exclusively German investors. units versus 2.7 million students –, an units worth almost €200m. The bond is senior secured mort- enormous modernization backlog and The Kiel deal brings DREF’s stu- gage-backed and has an investment rising student numbers make Germany dent housing portfolio to €200 mln. The grade rating (BBB) from Creditreform. a market with great potential for private company has also secured existing DREF, whose shareholders include investors. and development properties with a val- Internos Global Investors and Somer- The market for student housing in ue of about €100m. Kiel, the cpaital of ston Group, had already purchased five Germany is growing up rapidly, although Schleswig-Holstein, now has a record existing properties with the issue pro- it is by no means yet as established a 25,000 students enrolled in its university.

European Office Property Clock Q2 2015 The JLL Property ClocksSM

Lyon, Oslo Note • This diagram illustrates where JLL estimate each Cologne prime office market is within its individual rental cycle Frankfurt as at end of June 2015. • Markets can move around the clock at different Hamburg speeds and directions • The diagram is a convenient method of comparing the relative position of markets in their rental cycle Berlin, Munich, Stuttgart • Their position is not necessarily representative of investment or development market prospects • Their position refers to Prime Face Rental Values Rental Growth Rents Stockholm Slowing Falling

Dublin London City, London WE Moscow, St. Petersburg Luxembourg Rental Growth Rents Accelerating Bottoming Out Dusseldorf Manchester Amsterdam Kiev, Warsaw

Edinburgh Geneva, Zurich Copenhagen Rome Barcelona, Madrid Athens, Brussels, Helsinki, Paris Milan CBD, Bucharest, Budapest, Source: JLL, July 2015 Prague, Istanbul, Lisbon

This data is based on material/sources that we believe to be reliable. While every effort has been made to ensure its accuracy, we cannot offer any warranty that it contains no factual errors. Neither Jones Lang LaSalle nor any of its affiliates accept any liability or responsibility for the accuracy or completeness of the information contained herein. 32

Guest Column: George Salden (9) estate funds. The nominal capital traded in amounted to 123.8 million Euro, a drop of 4.5% from the previous year. SERIES: The German Real Estate Market: Realising Value is the Key to Rate of Return Closed-ended funds have a bad reputation amongst in- vestors, because of the great losses incurred during the Welcome to the second part of the series “Realising Value financial crisis. However, the fact of the matter is that through the Dynamic Method.” In the previous edi- today the investment possibilities tion of REFIRE we turned our attention to the key within closed-ended funds have data of the German real estate market, and then significantly expanded. That also we undertook a thorough review of institutional in- applies to the risk that is included vestors, real estate stock corporations, and REITs, for the entire spectrum, from con- as well as open-ended real estate funds. Today we servative all the way to develop- will concern ourselves with other participants in the ment projects. During the 1990s market for residential property. Important players closed-ended funds were general- in this regard are closed-ended real estate funds. ly used as tax-avoidance schemes They are invested in by banks, insurance compa- and primarily for property in the nies, as well as various types of companies in the new German states. Today they economy, including companies constituted under are more likely to be oriented to- the German Civil Code or limited partnerships. They are ward return on investment. The majority of investments called “closed-ended,” because of the fixed definition of take place in the core segment. For closed-ended real es- and the limitations on the number of investors, the invest- tate funds this offers an optimal investment opportunity ment purpose, as well as the assets under management. for investments in the middle-risk segment. In this regard, one must differentiate between funds based on one’s own capital resources and those based on out- For the duration of the fund no dividends can be paid out side, borrowed capital. Their purpose is to ensure the fund of capital, with the result that a higher return can be at- rather than the security of the real property itself. The funds tained than with open-ended real estate funds. In addi- that have been acquired in a closed-ended fund can be tion, the real estate is generally sold at the end of this time sold, but only if a buyer is found who is willing to assume period. Therefore, real estate with a developing value that the shares. Under the new KAGB (Kapitalanlagegesetz- will be realised in trade is especially suited for closed-end- buch = German Capital Investment Code) the key points to ed real estate funds. Such possibilities are offered by val- be monitored are risk spreading and liquidity, which were ue-added real estate as well as by opportunity properties. previously only subject to limited requirements. These investments are generally undertaken by so-called project investment funds with a return in the area of 10%. After the start-up phase closed-ended funds must demon- In order to generate such returns, the funds must at least strate risk diversification to the BaFin (Bundesanstalt für acquire value-added objects. The bottom line: special Finanzdienstleistungsaufsicht = German Federal Financial funds only take risky strategies if they have experience to Supervisory Agency). For example, this qualification is build to sell, opportunity or development segments. met if investments have been made in a sufficient num- ber of properties. The new July 2013 version of the KAGB An additional investment group that is active in the real has undertaken various important changes to closed-end estate investment market is that of private investors, who funds that have subsequently altered business therewith. undertake investments in the form of private placements. An important innovation is that closed-end funds are now Above all, ownership of real estate is a favourite form of under the supervision of the BaFin and have thereby lost capital investment for people with medium to large assets some of their scope of action. who seek to ensure financial security in old age. Reasons for this are the often addressed factors of stable value de- In Germany closed-ended real estate funds constitute an velopment and a continuing return. A large number of pri- investment fund that has been recently declining in signifi- vate investors differ from institutional investors in that they cance. During the entire year of 2014 3,168 business trans- generally have smaller investment volumes. Private place- actions were completed in the area of closed-ended real ments are difficult to characterise because they differ so 33 www.refire-online.com

greatly in regard to all aspects of an investment: from use investments or project development companies that un- for the duration to investment strategy, private placements dertake risky investments in opportunity and development include all aspects of real estate investment in German res- segments, can often be of interest as exit portals. How- idential property. Private investors also differ in terms of the ever, due to their speculative character they involve great category of professionalism they belong to. While wealthy risk. Opportunity funds act on the basis of a similar con- private individuals show a high degree of professionalism, in cept and, in terms of risk/return profile, even exceed that part through the use of an assets administrator and family of project development companies. offices, small-scale investors often invest based onemo- tional reasons. It should be noted that it is mostly investors In conclusion, it is clear that in order to realise the value of with a high level of professionalism that undertake more real estate, an optimally prepared exit process is neces- risky investment strategies. In order to use private place- sary. The exploitation of real estate at the end of the invest- ment as an exit portal the potential buyer should be made ment cycle can - especially in the case of value-added, subject to precise analysis. The criteria for such an analysis development, or opportunity assets - generate the majority are, in addition to financial soundness, primarily the individ- of the return. After it has been determined, in the context ual need profile of the private investor. Only thus can the of the value-increase process, into which investment class value of the real estate be optimally realised. the property falls at the end of the investment cycle, then it is decisive for realising value to find the appropriate buyer In addition to the aforementioned types of investors there for the property. In this regard the exit strategy must al- are still numerous types of small investment forms that are ways be adapted to current market conditions. undertaken in regard to real estate and that therefore can be used as an exit portal from the investment cycle. Another However, the realisation of value does not just consist in group of investors that is especially focused on the goal of realising a higher return. Based on the investment strategy, retaining value and therefore make “modestly conservative” other goals may instead receive emphasis. For example, investments are foundations. Foundations generally make non-property companies sell their business real estate to long-term investments, because they only have an extreme- leasing companies in order to increase liquidity. The goal ly small need for liquidity. All payments out of a foundation of tax savings can also play an important role in the sale are not taken from the assets themselves, but rather from of real estate. Yet the determinative personal or business the revenue; therefore foundations invest in real estate be- goals should always focus on realising the highest possi- longing to the core segment. In order to increase revenue, ble added value. a part of the investments can be made in the value-added area. This generally occurs in the case of smaller founda- It is indispensable, as has been pointed out, to find the tions and mostly indirectly. Only larger foundations are in right partner for a sale. This is easiest to do if the real es- the position to possess the necessary know-how in order tate to be sold corresponds to the investment strategy of to themselves realise the complex increase in value that val- the potential buyer on the market. Depending on which ue-added investments require. products the potential buyer itself offers, it buys real estate with the corresponding risk/return profile - one only has to Real estate leasing companies are also active in the market seek and find them. as investors. They generally transfer the usage rights to the real estate they administer on a long-term basis with an op- George Salden is the author of the book “Die Dynamische tion to renew or buy. The possibilities of leasing are of partic- Methode” [The Dynamic Method] based on his 19 years of ular use to non-property companies. Those companies that experience as an expert and manager in property and trans- primarily use their own real estate for business operations action management which highlights the way towards a often make use of a “sale and lease back” strategy, in order whole new method of determining the profitability of prop- to generate liquidity. erties. He was previously a director at alt+kelber Immobil- ienmanagement, a subsidiary of conwert Immobilien Invest Housing associations are suitable buyers that can serve as SE, where he was responsible for major international trans- an exit from a residential property investment. Their goal is actions. He then took over as International Head of M&A at to realise earnings from renting residential property. Even AK Holding GmbH & Co. KG. He is now Head of Transaction/ real estate funds that only indirectly engage in real estate Executive Board Member at Dr. Lübke & Kelber / Arbireo. 34

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