Volume 8, Issue 141, February 6th, 2015 Investors shift focus to cities and assets - Inside REFIRE Berlin, Hamburg top list of 2016 prospects REFIRE is a specialised report focused on providing market intelligence and back- Among the many prognoses issue at this time of year about the prospects ground analysis to finance professionals for the coming twelve months, one that always features prominently come in German and continental European real January is the Emerging Trends in Real Estate Europe study, jointly published estate investment. by consultants PricewaterhouseCoopers (PwC) and the Urban Land Institute. This year’s 2016 study (the 13th in the series) highlights a number of key attitu- Whatever your particular area of speciali- dinal changes among investors, none of which will damage Germany’s pros- sation, we think you’ll find timely, incisive pects of attracting even more inward investment throughout 2016 and beyond. information within our pages, helping to in- form you of the key deals, the numbers, the The study was carried out among 550 Rockspring tops €850m year markets, the players and the people. European real estate professionals with major retail acquisitions PwC and ULI conclude that this year The London-headquartered Rockspring The areas we focus on are: investors were being pointedly more Property Investment Managers finished off influenced by disruptive factors such a year of major acquisitions in Germany by US Funds in Europe as technology, demographics, social buying a portfolio of nine Obi retail stores European REITs change and rapid urbanisation. These on behalf of two separate account man- German Real Estate Finance have led to investors sharpening their fo- dates, for a total price of €150m. . page 2 German Non-Performing Loans (NPLs) cus on to cities and assets, rather than Retail Property Funds the somewhat blunter criterion of country WCM tops €500m in assets, Mortgage Securitisation allocation. DIC Asset takes 20% stake CMBS/RMBS The combined survey also cites the Germany’s SDAX-listed WCM Beteiligu- Privatisations five leading cities for investment pros- ngs- und Grundbesitz-AG saw its gross Refinancing pects through 2016, which sees Berlin asset value exceed €500m after a spate of Euro-zone Property Financing defending its position as the top invest- acquisitions last year. It has since added ment location, followed this year by Ham- a further two retail parks and a DIY store REFIRE has an extensive network of con- burg, Dublin, Madrid and Copenhagen. not included in its end-of-year valuation, tacts in the field of continental European Having the two German powerhous- worth a further €48m. see page 6 real-estate finance, which enables us to es of Berlin and Hamburg heading the bring you the latest and most relevant news. list sends out a strong signal about the Law change sees shakeout However, we always want to know more transformation of industrial prospects in German broker industry about what’s going on in this dynamic sec- in Germany’s biggest cities. The report Germany’s ruling coalition government tor, so make sure your company is keeping highlights the influx of firms in the cre- in Berlin has brought in two significant us informed of your moves. Send your me- ative industries and the technology sec- changes to the domestic residential hous- dia communications to news@refire-online. tor has been a key driver behind the most ing market in this legislation period. The com for our consideration. robust office uptake Berlin has ever seen. first was the Mietpreisbremse, or rental According to the authors, “A young, cap, which limits the amount a landlord international and diverse employee base can increase the rent on a new lease to CONTENTS in this Issue: and a lower cost of living have also driv- a prescribed percentage. see page 12 en the city’s progress. Berlin’s status as a DEALS ROUNDUP / from page 3 cultural centre and a trendy location has Industria Wohnen plans fur- EDITORIAL / page 4 boosted housing and retail prospects as ther €300m new deals in 2016 REPORT - /ROUNDUP page 10 well.” The Frankfurt-based residential inves- UPCOMING EVENTS / page 29 They add that “Many interviewees tor and fund manager Industria Wohnen PEOPLE…JOBS…MOVES / expect the German capital to thrive well transacted €475m of deals in Germany SUBSCRIPTION FORM / page 32 beyond 2016, based on its young pop- throughtout 2015, a rise of 40% on the ulation and its growing reputation as a previous year. The group has set asid technology and cultural centre, as well €300m for investment for 2016. page 15 2 3 www.refire-online.com

...... DEALS ROUNDUP

as the land available for development,” lan, Amsterdam and Munich. London, from technological advances and rising ity remaining high, while most European offers the lowest prime yields on office REFIRE the report said. while falling out of the Top 10 this year, economies. 78% of respondents also economies are in a visible recovery phase. space, and Cologne (4.5%) the highest. Real Estate Finance Hamburg, which displaced Dublin remains the favourite for many investors took a favourable view of development This, of course, is also attracting new fi- Core properties in Germany’s Big Intelligence Report Europe from second spot in intent on preserving as a strategy to acquire assets. nancing competitors into the field. With 7 cities also saw average yields slip- this year’s ranking, “Some of the industry’s their wealth, by virtue PwC director Gareth Lewis added, prime property now reaching fresh record ping by 30 basis points, down to 4.8%, also garners plaudits biggest challenges right of its traditional trans- “Low interest rates, and the weight of prices, the study sees prices in all other with high-risk office buildings providing Operating Office for its forward-looking parency and liquidity, capital bearing down on European real risk categories also heading upwards. smaller surcharges. Investors said they REFIRE now are how to become Habsburgerallee 95 approach. With low less about bricks and along with the strong estate, mean that most remain bullish PwC also took advantage of the sur- expect the highest annual growth for 60385 Frankfurt am Main, GERMANY office vacancy, and a mortar and more about performance of the UK, about the industry’s business prospects vey to produce a separate “Real Estate 2016 in rental income in Munich (2.2%), Tel: +49-69-49085-785 fresh pipeline of nearly and particularly the in 2016. But they acknowledge that the Investor Survey Germany”, which fo- followed by Berlin (2.1%) and Frankfurt Fax: +49-69-49085-804 service, and the implica- Email: [email protected] 130,000 sqm of supply tions this may have for the London, economy. global field for real estate is increasing- cuses on yields in Germany’s larger cit- (1.9%). Prime yields on retail property due to come on stream traditional business mod- More than 40% of ly competitive, and if the current wall of ies. The survey claims that prime yields also decreased in the Big 7 by around 40 Managing Editor: this year, the authors the survey’s respon- capital recedes, there will be an even for first-class office properties are now basis points. Munich, again, is the most Charles Kingston els of real estate opera- Tel: +49-69-49085-785 say, “Hamburg has tors ” dents expect that com- stronger focus on underlying market lower in Berlin than in Frankfurt. They expensive (-30 basis points to 3.3%), Fax: +49-69-49085-804 proven a dynamic city petition for top assets fundamentals, active asset management fell 30 basis points in Germany’s capital and investors expect particularly high Cell: +49-172-8572249 that responds to the needs of future oc- in desirable European in- ner-city loca- and operational skills.” during 2015 to 4.0%, while in Frankfurt, growth for rental income there (2.4%). Email: [email protected] cupiers. With more than €5bn in invest- tions will further increase this year, The study also points to an improving the fall was only 10 basis points to 4.1%. These are followed by Stuttgart (2.2%) Subscriptions: ments over the year to 3Q15 – over half with less and less pure ‘core’ properties climate for real estate financing with liquid- Among the top 7 cities, Munich (3.7%) and Berlin (2.1%). Tel: +49-69-49085-785 of which originated from foreign buy- available. However, such assets and lo- Fax: +49-69-49085-804 Email: [email protected] ers—Hamburg is the sixth most active cations are still seen as representing a market in Europe.” safe haven for investment resources. Advertising: The report, released ahead of this According to Jochen Brücken of Tel: +49-69-49085-785 Fax: +49-69-49085-804 week’s ULI Europe Annual Conference in PwC, “In the current ongoing phase Wüest & Partner Email: [email protected] Paris, examines why investors are now of very low interest rates, real estate Germany more inclined to avoid the still offers better Editorial Advisory Board: Klaus H. Hausen strightforward country yield prospect Colm O’Cleirigh, B.Arch.Sci. approach more typical of than bonds. This Margarete May, Rechtsanwältin We provide the strategic decision- the past. “These…(dis- trend will continue David Scrimgeour, MBE Christian Graf von Wedel ruptive factors)… have throughout 2016.” tools for your success Glenn J. Day FRICS led to investors focusing Commenting on Andreas Lehner on cities and assets rath- the study’s finding, Stefan Engberg, MRICS er than countries. This is ULI Europe’s CEO Wüest & Partner combines the benefits of individual Publisher: also visible in investors Lisette van Doorn experts − such as personal skills and responsibility − with REFIRE Ltd., demonstrating more interest in alter- (pictured, left) said, “Investors are get- 49 Sandymount Avenue, the kind of extensive market knowledge typically found at Ballsbridge native, operational sectors that have ting more creative in trying to access major consulting firms. Dublin 4, Ireland benefited from rapid urbanisation and future prime assets at reasonable prices demographic shifts, such as healthcare, through more focus on alternatives and Wüest & Partner combines a market-driven approach Real Estate Finance Intelligence Report Europe hotels, student accommodation and development. They are taking more risks (REFIRE) is published 22 times a year, at the be- with exceptional methodological know-how. The consultants data centres.” in the short term to fulfil their long-term ginning and in the middle of each month, with are experts in national and international valuation methods. two holiday breaks. REFIRE is editorially inde- This shift among investors to looking objectives for core assets.’ pendent of any selling or investing institutions. In- at alternative sectors for returns is an- “Some of the industry’s biggest chal- formation contained in REFIRE is under copyright Wüest & Partner offers broad market information and protection and is based on sources believed to other key finding of the study. This year lenges right now are how to become be reliable, though their complete accuracy can- 41% of respondents said they would less about bricks and mortar and more advisory services, in addition to traditional valuation and not be fully guaranteed. Neither the information consider investing in niche sectors about service, and the implications this appraisal reports, to all market participants. contained in REFIRE nor the opinions expressed therein constitute or are to be construed as con- such as healthcare, student accomoda- may have for the traditional business stituting an offer or solicitation of an offer to buy tion, hotels and data centres – this is a models of real estate operators,” said Wüest & Partner or sell investments. REFIRE accepts no liability marked increase on the figure of 28% Van Doorn. for actions based on the information herein. Neue Schönhauser Str. 20, 10178 Berlin Germany, T +49 30 2576 087-0, [email protected] looking at these sectors only a year ago Among other sectors predicted to do © 2016 REFIRE Ltd. Behind the Top 5 in the PwC/ULI well this year are high street retail and ranking come Birmingham, Lisbon, Mi- logistics, both of which are benefiting 4 5 www.refire-online.com

...... EDITORIAL

Don’t miss out on the silver lining by over-shooting for gold

Over 300 of Germany’s real Nonetheless, such heady others might be comfortable taking. Germany/Retail real estate os were bought and sold in the sector, German market, commented on the estate fund managers at the valuations as he’s now seeing But the risks ARE rising, said La Rockspring tops €850m year culminating in the collapse and closure deal. “This is a highly desirable, well-lo- recent BIIS Jahrestagung in ARE somewhat ‘spooky’, he Pierre, not just in the price levels but with major retail acquisitions of the Praktiker/Max-Bahr chain. cated portfolio that we have monitored Frankfurt heard from a number conceded, and more than a particularly in the deal structures and The deal involves sale-and-lease- for a number of years. The units, which of prominent speakers that little reminiscent of the heady the small print in the contracts. The London-headquartered Rockspring back transactions with Obi, now the were originally built by Obi, are situated little could dampen the pros- days before the markets went The lowering of guarantees, co-ex- Property Investment Managers fin- leading German DIY operator, who re- in strong retail warehouse municipalities pects of at least three more into a tailspin. clusivity with others in the process rath- ished off a year of major acquisitions in main the tenant in the nine properties. and are dominant in their catchment ar- good years of rising commer- He gave a number of useful er than being the sole player, the disap- Germany by buying a portfolio of nine The stores cover 120,000 sqm of let- eas. Rockspring’s platform of retail ware- cial real estate prices. in-house examples. Leipzig, pearance of capital gains discounts in Obi retail stores on behalf of two sepa- table space including the 20,000 sqm housing in Germany and Switzerland Philip La Pierre, head of not exactly an internation- competititve deals – these all represent rate account mandates, for a total price Obi flagship sotre in Berlin-Zehlendorf. now amounts to over €2 billion, which in- European investment at leading fund al hotspot, where Union pulled out of extra risk in the buying phase that have of €150m. The seller is an English invest- Along with another major store in Berlin, corporates over 100 retail units, making manager Union Investment, took a bidding at a multiple of 19, to see it go to be added to the market risk. Taken ment group who bought the assets in a the properties are in Augsburg, Neuss, Rockspring the largest long term foreign more tempered view. He gave a lively for more than 21 times annual income. together, in La Pierre’s view, the market sale-and-leaseback in 2006/07 after Obi Siegen, Haiger, Schwelm, Vechta and investor in this sector.“ presentation entitled “Yields and risk Ambitious pricing, as he sees it. is back where it was in 2007, if not al- had built them. Dresden. The stores have an average In a follow-up deal in January, Rock- premiums – are the markets slowly Or Berlin, the hottest German market ready beyond that point. It’s one of the biggest deals in the remaining weighted average lease term spring bought an 18,500 sqm retail unit getting spooky?” He gallantly took it at the moment. A good location on the Hence it’s time again for investors to German DIY market since the heady of seven years. in Rangsdorf, a commuter town south upon himself to share with his audi- Leipziger Strasse for €40m, 26 times review their commitment to first prin- days of free-wheeling dealmaking in the Rockspring veteran Stuart Reid, as of Berlin on the Berliner Ring Autobahn, ence how one of the biggest real es- income, 3 years remaining lease term. ciples, he says, and gave his audience years 2004-2007, when several portfoli- the partner with responsibility for the and well placed for the opening (whenev- tate investors in Europe views current Again, it was not so much the multiple some advice from Union’s in-house in- market pricing. as the speed with which the rival suc- vestment manual. He cannot help being surprised, he cessful bidder swooped in to grab the In the current climate, don’t be admitted, that the market continues to property that was the ‘spooky’ thing. tempted to revalue your assets at ev- lurch from one record deal to the next, Logistics, the surprise hot sector of ery opportunity to sexy up the balance that low yields are being trumped by last year, threw up many examples of sheet. Buy very selectively, with the ever lower yields, and the glossy mar- where Union regularly came up against emphasis on yield, quality and location, STRUCTURED REAL ESTATE INVESTMENTS IN GERMANY ket reports from the big broker groups more aggressive buyers, willing to go rather than capital appreciation. There are still sparing no expense in their well north of 18-multiples to lock up the is value-added potential even in every BASIC RETAIL IS ALWAYS SUITABLE! drive to outdo their competitors in deal. As La Pierre said, to an outburst core investment. Use the time now, painting optimistic scenarios for their of nervous laughter, such toppy pric- where prices are strong, to improve as- If you ask foreign investors what they lutions under German law, and, for foreign The issuance of a debt financing instru- appreciate in the German real esta- investors, structured investments via Lux- ment is done as second rank. Although investor clients. es were being justified by the advising sets in your holdings even if you plan to te market the answer is: Long lease embourg platforms can be realized. The the collateralization of the property might The standard arguments for the rosy brokers as characteristic of a ‘Para- sell them, and reduce the long-term risk terms compared with the rest of Eu- latter are particularly suitable to pool ins- be difficult due to the first rank bank finan- vista are wheeled out in every discus- digm Change” – rather than, in his view, of holding assets with poor reversion- rope; in general positive credit ra- titutional investors from different countries cing, nevertheless Basic Retail properties tings and payment practices; and the and to structure a tax-efficient investment sion, he said. And indeed, they do have just representing a ‘very high price’. ary potential. in Germany offer high cash flows compa- rule of law which results in planning for them. Furthermore, investments in the red with other real estate asset classes. a certain validity. There’s the wall of Yes, we know that the internet and Sound words, in our view. Of course, security. Basic Retail segment are highly fungible. If This allows the fast repayment of the first money that needs to be invested. That’s e-commerce are creating new logistics all investors inevitably believe that they things turn out differently than planned and bank financing so the second rank, which not disappearing overnight. If anything, demand, but - Hmmm, just where did are prudent, cautious and alert to mar- If applied to the real estate market, the- unscheduled divestments must be made, is the position of the investor, gets safer se parameters show that the Basic Retail investors benefit from the characteristics and more attractive throughout the term. new sources are appearing daily. we hear all that paradigm change busi- ket tipping points. But the sheer weight segment, that is properties which ser- of fund property. There are approximately Office rental income is rising, and ness before? of money, low interest rates and the ve to supply consumers with everyday 35,000 Basic Retail properties in Germa- In conclusion, Basic Retail real estate will continue to rise because of the low Naturally, Union Investment has ac- ‘spread above the risk-free return’ ar- goods, perfectly meet the requirements ny. This provides for a functioning market can be excellently acquired via struc- level of construction. Vacancy rates cess to the best advisers, sophisticat- gument are lulling many investors into a of the abovementioned investment condi- which, in turn, makes for an attractive in- tured investments, thus offering the in- tions. The creditworthiness of the German vestment. It should, however, be taken vestor a safe and long-term cash flow in across Germany have been falling. In- ed valuation experts, and its own ex- cosy sense of being unable to do any- consumer market chains and discounter into consideration that a commercial tax a stable environment. vestors with a more opportunistic ap- tensive experience. This doesn’t shield thing wrong. There may indeed be few chains is very high, thus ensuring the ban- rate of about 16% may apply if the proper- proach than Union Investment tend to it from making mistakes, of course, or visible clouds on the German horizon, kability of the investments. The lease terms ty is sold short-term.For investors who are input more rapidly-rising rent levels to overlooking new realities. Union is still as other speakers at the same gather- of commercial tenants run for a minimum looking for stable profit under commercial of ten years, which is above the European law, Basic Retail real estate qualifies also in Martin Führlien their Excel spreadsheets than may oc- a major buyer across Europe, and a ing suggested. But as George S. Patton average. Additionally, the German Com- the form of the underlying asset for bonds CFO GRR Group cur – and foreign investors are to the big investor in project developments. liked to say, when everyone’s thinking mercial Leasing Law is on firm ground. Ba- and promissory note structures. It can be fore in anticipating more rental upside It is inevitable it will lose out to nim- alike, then somebody isn’t thinking. sic Retail is suitable for every conceivable designed in such manner that a portfolio www.grr-group.de investment structure. In particular, fund so- company takes out first bank financing. than conservative domestic investors. bler competitors on many deals. It has This much is true, granted La Pierre. a duty to its savers to avoid risks that Charles Kingston, Editor 6 7 www.refire-online.com

drlübkekelber GERMAN REAL ESTATE

er that happens…!) of the new BER inter- Germany/Listed Companies yield of 6.3%, with an average WALT on national airport. WCM tops €500m in assets, lease contracts of 9.2 years, financed by The property, which is let to furniture DIC Asset takes 20% stake average loans of 6.4 years duration at an retailer Roller Möbel, abuts the high- average interest rate of 2.1%. ly-frequented Südring Center retail ware- Germany’s SDAX-listed WCM Beteiligu- However, part of the attraction of WCM house park which Rockspring bought in ngs- und Grundbesitz-AG saw its gross in battling its way out of insolvency, in- September last year. Bought on behalf of asset value exceed €500m after a spate of stead of just winding itself down, was its the same separate account mandate for acquisitions last year. It has since added ability to write off up to €500m in deferred €15 million, the newly acquired asset in- a further two retail parks and a DIY store corporation and business taxes arising creases the value of the combined hold- not included in its end-of-year valuation, rom the insolvency. Were DIC to increase ing to over €75 worth a further €48m. its stake to more than 25%, REFIRE un- million. The minnow was once one of derstands that these write-offs would no Again, Stuart Germany’s more prominent listed longer apply. Reid (pictured, companies before filing for insol- CEO Efremidis took over the helm at right) explained the vency in 2006, and then relaunch- WCM at its relaunch in September 2014, rationale behind ing as a debt-free company in and kicked off its recovery with the €100m the deal. “This 2014. Since then it has been ex- acquisition of four commercial properties transaction marks panding rapidly, with CEO Stavros in Frankfurt, Berlin, Bonn and Düsseldorf. our tenth major Efremidis aiming to build a €1bn Efremidis had come from listed KWG Im- strategic investment into dominant retail portfolio by buying core-plus and value-add mobilien, where he had boosted KWG’s warehouse investments in the region’s assets in Germany’s A- and B-cities. housing portfolio from about €3m to more strongest catchment areas.” As REFIRE reported in these pages than €400m, with more than 10,000 res- “We are seeing a clear trend in the three months ago, WCM raised €155.8m in idential units and a gross lettable area of region of rising tenant demand for the a rights issue last year to fund new acqui- 600,000 sqm. With equity of €170m in the best retail shopping centres and, along- sitions, including the €92m Main Triangle balance sheet, he subsequently sold 60% side this, increasing institutional appetite office in Frankfurt, and an office portfolio of the company to acquisitive Austrian for such stock. Rangsdorf is located in in the Rhine-Main region and Dresden for residential investor Conwert Immobilien. Berlin’s improving southern commuter €116m. It also took a majority stake in a Now at WCM, Efremidis is trying to belt and we have a number of immediate fund to be set up by Dublin-based Green- repeat the trick, and says the timing is and medium term plans for improving the man Investments to hold a portfolio of perfect for the commercial office sec- tenant mix and profile of the centre.” German supermarkets worth €95m. tor. “In contrast to residential, not much Reid said that, all told, Rockspring WCM’s activity has attracted the atten- has happened the past few years. We’re completed €850m in transactions in tion of larger listed German companies. also finding very good lending terms out Germany last year (€700m were acqui- Last week the listed DIC Asset said it had there”, he says. sitions, while €150 were disposals), and acquired more than 20% of WCM, and Thanks to the corporate and commer- this year will target the country’s logistics did not rule out increasing its stake. At the cial tax loss carryovers, WCM can benefit and office property, as well as further re- then share price, this likely involved an in- from very favourable tax treatment of its tail warehouses. vestment of about €70m. profits, and in particular can make gener- Transactions last year continued to In a letter to shareholders, DIC ex- ous dividend payments to shareholders focus on the retail warehouse sector in plained its rationale: “Through its equity without the deduction of any withholding Germany, totalling forty separate assets, interest, DIC Asset will participate in the tax (capital gains tax). First dividend pay- with the acquisition of a €350m portfolio future growth of the company and in its outs are planned for 2017. of 23 out-of-town assets from a JV be- attractive commercial real estate portfolio. In November WCM placed shares with tween London-listed malls group Capital One of our objectives in taking this ap- institutions at €2.20, raising €24m. The & Regional and a real estate fund man- proach is to expand DIC Asset’s footprint current share price is about €2.80 after a aged by listed LA-based wealth manager in Germany’s commercial real estate sec- run-up with DIC buying its stake, but has Ares. It saw increases in both pricing and tor.” There were strong overlaps with DIC’s held up firmly since then and throughout institutional demand. Rockspring is now own investment footprint, it said. the current market sell-off, where nearly the biggest long-term foreign investor in DIC pointed out the attractions of all of its peers have suffered. This defi- Germany in the retail warehouse sector. WCM’s swiftly-built portfolio. Average net nitely suggests robustness. 8 9 www.refire-online.com

Germany/Conference Report would prove damaging for German real tries (UK, France, Germany) gaining in BIIS Conference hears bull- estate prospects. What they did envis- importance. (These countries received ish projections for Germany age, however, was that the long arm 56% of all investments last year.) through 2018 of government would increasingly be However, investing in niche sectors looking to impose penalties on property within these markets is now more im- With the demise of the traditional Janu- owners, in the form of heavier taxes and portant than having a broad presence ary CIMMIT conference a couple of years other disincentives to ownership. based across all Europe. Within these ago, the likewise in January recurring In one of the sprightlier presentations niche sectors, sustainability and environ- BIIS Jahrestagung event for Germany’s that we’ve witnessed from a bank chief mental aspects were increasingly to the real estate fund managers seems to have economist, Helaba’s Gertrud Traud told fore in attracting the top tenants. scooped up a lot of the overspill. the audience “Sure there’ll be anoth- Not everyone was so euphoric about This year’s gathering (the seventh) er recession, but not in 2016, nor next the prospects for the next three years. of the BIIS Jahrestagung at Frankfurt’s year, nor the year after.” Philip La Pierre, (pictured, left) Steigenberger Airport Hotel was filled to The oil price will remain head of investment management capacity with more than 300 delegates, low for at least the next Europe at industry heavyweight anxious to take the pulse of the German five years, she forecast. Union Investment gave several ex- real estate climate before the year gets “And we’ll benefit from amples of where Union had backed fully underway. According to the organ- that”, she said out deals that looked as if the price isers, this was 50% more than last year’s Likewise for Barba- demanded was overly frothy, and attendance. ra Knoflach, long-time very difficult to justify, (see our ed- REFIRE joined the gathering to gar- head of SEB Asset itorial, Page 4). ner our own impressions of what can still Management in Frank- Daniel Tochtermann of Credit only be described as a very optimistic furt and now global Suisse also expressed scepticism. industry sector, with little on the horizon head of investment at BNPPRE, blue Instead he asked his audience – “Where Greenman causing too many of the delegates too skies are still stretching out for the next are we at the moment in the economic lose much sleep at night. three years in the industry, largely as a cycle? How dangerous is it when central If anything this led to a series of large- result of low levels of construction de- banks with their low interest rate policy ly uninspiring presentations from the spite the low interest rate. are driving people into investing in real speakers, most of whom paid nodding Leaving the Asian hype aside, she estate? When will that go into reverse?” Investments reference to rising interest rates as the said, the real growth is coming from He also questioned Helaba’s chief econ- Greenman are sector specific investment fund managers. Our sole focus is the German food retailing only possible danger to prevent the good North America, along with increased omist Traud’s assertion that rock-bottom asset class, Fachmarktzentren. Greenman manage assets with a value of over €250m located across times rolling on. While at the same time demand for the asset class from higher oil prices was an unmitigated blessing assuring the audience that this was un- earners and the real high net worth in- for Europe’s consumers. What about the Germany. Our investment strategy delivers: likely to happen any time soon. dividuals, as well as further commitment effect that such a low price will have on • low finance & operational costs So prices have much further to rise, from the myriad of sovereign funds and countries such as Russia and Saudi Ara- • high annual rent surpluses then? Several speakers cautioned their other pension funds seeking congruence bia, he asked. What, indeed. • twice annual investor distributions listeners against revaluing their holdings of their long-term liabilities. As long as upwards in the light of current optimism, the spread between real estate yields • flexible investment structures or indeed suggested that “now might a and the risk-free rate of return remains Germany/Financing • conservative exit models good time, while such partly absurd pric- at 300 to 400 basis points, new entrants Access to German market • operational transparency es are being paid, to optimise their port- will be drawn into the sector, she said, for foreign loan funds still folios”, i.e. sell. with many being drawn in from the cap- difficult www.greenman.com The consensus among most dele- ital markets. For more information about Greenman and our investment priorities please contact a member of our investor relations team gates was that German real estate was With both Frau Knoflach andThomas Much of the hype surrounding the rise in our Dublin office on +353 1 647 1121 | [email protected] continuing to benefit from external eco- Schmengler, CEO of giant fund group of loan funds in Europe has only limited Premier Benchmark Property LTD., t/a Greenman Investments is authorised as an Alternative Investment Fund Manager by the Central Bank of Ireland nomic uncertainties, with a straw poll on Deka Immobilien, agreeing that the relevance for Germany, as nearly 90% under the European Union (Alternative Investment Fund Managers) Regulations 2013. Authorisation number C123941. the day showing 42% seeing positive good times will continue, both addressed of the freshly-minted pan-European ve- effects for Germany and 38% seeing another emeriging theme. For the bigger hicles are incompatible with the needs at least neutral effects. Less than 20% investors the European market is getting and demands of the German market, ac- thought any external economic scenario smaller, with the core European coun- cording to the Berlin-based independent

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consultancy Flatow Advisory Partners to overcome when they initially enter the senting a major breakthrough. A further Germany/Healthcare year, climbing 3% to €834m. This is the “Investors from Germany and abroad are (FAP). market”, says Flatow. He says that while four companies are components of the Higher utilisation hinders second-highest volume ever, trailing only increasingly looking at health and social FAP is in a good position to know, as he’s not expecting a boom in the sector, MDAX, for mid-sized companies, while volume of nursing homes on the boom year of 2006 when €1.2bn of property as an asset class independent it specialises in procuring and structuring he does envisage more joint financing a further six are in the SDAX for smaller to market deals were transacted. of economic cycles,” said CBRE’s Head real estate financing deals throughout between alternative financing providers companies. These companies together Interestingly, nearly half of all deals of Real Estate Finance Dirk Richolt. Spe- Germany. The mismatch, says FAP, is de- and banks than in the past. “Indeed, we make up 3% of the market value of the As investors become more specialised happened in the last quarter, and port- cialised fund managers and listed firms in spite the German Financial Supervisory have arranged several such deals in the value of the leading indices, with a rising and seek value in niche sectors, one folio deals jumped strongly (nearly 65%) particular are counting on ageing demo- Authority BaFin easing regulatory condi- past year – senior capital from the bank, trend. Alexander Dexne, the chairman of sector which was tipped to soar last year over the previous year. graphics to produce rising demand for tions for loan funds last year, giving along with a junior tranche via ZIA’s listed property platform, points out in Germany was the managed healthcare According to CBRE’s head of research professional nursing services. a big fillip to interest in the financ- mezzanine finance”, he says. that this share represents the same as the sector, which has been drawing a lot of Jan Linsin, “The nursing home asset Operators are reporting rising utilisa- ing instrument. Flatow said he also sees listed property sector in the USA before attention of late. It didn’t quite match class has established itself and the fur- tion rates and many have renewed leases Rating agency Scope says there more opportunities in the the start of the financial crisis. volume expectations last year, nor reach ther rise in transaction volume shows the on the back of strong performance. “This are 53 loan (credit) funds current- provision of whole-loan fi- Among individual sectors, the residen- property advisor CBRE’s forecast €1bn increasing interest from domestic as well has removed some saleable product off ly set up and in issuance across nancing, with the credit fund tial sector remains far larger than com- in transaction volume for the full year. as international investors in this alterna- the market again, as the general sales Europe, with a target volume of providing a high LTV capital mercial property focused firms. Around Still, CBRE points out in a recent re- tive asset class.” Last year, deals were pressure lessened and owners are hap- €33.8bn. “The truth is, however, tranche, thus lending senior 1 million housing units now held by list- port, offering attractive yields of up to driven by portfolio acquisitions by North py with their existing investment,” said that 90% of pan-European credit and junior tranches from a ed firms, as against 2.7m by communal 6.25% and a solid fundamental outlook, American and Scandinavian investors. Richolt. Investor demand is outstripping funds have conditions which simply don’t single source. This has the added advan- housing companies. Peter Barkow (pic- investment in nursing homes and senior Open-ended property and Spezial- supply so that transaction figures could fit the German market,” said FAP found- tage of keeping processing and docu- tured, below) of Barkow Consulting said, residences in Germany did at least con- fonds, and asset and fund managers were have been higher with more available er and CEO Curth-C. Flatow (pictured, mentation much simpler, he added. “The German residential property listed tinue its seven-year growth trend last responsible for over 70% of deal volume. product, he said. right) in a recent note. companies are becoming an ever more There are several reasons for this, important part of the housing market, says Flatow. Firstly, some credit funds Germany/Research but in the commercial sector it’s also be- focus only on senior tranches, but their German listed property sec- coming clear that a listing is an attractive European Office Property Clock Q4 2015 terms will be too expensive to beat tra- tor sees 17% rise in market model for real estate companies.” The JLL Property ClocksSM ditional bank or Pfandbrief financing, so capitalisation The capital markets as a financing in- Moscow 4:30 Warsaw 4:45 Note Geneva 5:00 Lyon, Oslo that only ‘unbankable’ assets will come strument are becoming more prevalent, • This diagram illustrates where JLL estimate each St. 5:00 Cologne into consideration at all. For the junior Last year saw a further sizeable rise in the with listed property firms being respon- Petersburg prime office market is within its individual rental cycle Kiev 5:30 Frankfurt at the end of December 2015 Athens 6:00 • Markets can move around the clock at different tranches, many funds demand deals of market value of German listed property sible for 30% of total equity placements Bucharest 6:00 Hamburg speeds and directions at least €15m-€25m so that, with loan-to- holdings, with the market capitalisation in the first half of 2015. Bonds are also Dusseldorf 6:00 • The diagram is a convenient method of comparing the Helsinki 6:00 Stuttgart relative position of markets in their rental cycle Istanbul 6:00 • Their position is not necessarily representative of value of 80%-85% maximum, financing of firms in the sector jumping fully 17.2% playing an increasing role as a way to di- Prague 6:00 Munich investment or development market prospects Rome 6:00 • Their position refers to Prime Face Rental Values volumes will have to be at least €100m over the previous year to total €78.2bn, versify financing, and meet high investor Zurich 6:00 Brussels 6:15 in total. However, given that the bulk of according to figures released demand – here, Barkow counts Lisbon 6:30 Rental Growth Rents Paris CBD 6:30 Slowing Falling single deals done are well less than this, by German Property Associa- 38 banks in Germany that have Budapest 7:00 Milan 7:00 London WE deal flow will be quite limited. tion ZIA. been active in placing equity Amsterdam 7:30 Barcelona 7:30 Berlin, Dublin, London City, Many international suppliers also price The ‘investible market capi- capital in the real estate sector Madrid 7:30 Luxembourg, Stockholm Edinburgh 8:00 Copenhagen these junior tranches too high, given re- talisation’ of the sector has ris- since 2009. Manchester 8:15 Copenhagen 8:45 turn expectations of at least 10%-12% en from a mere €1.5bn as re- Barkow also highlights the Berlin 9:00 Rental Growth Rents Dublin 9:00 Manchester Accelerating Bottoming Out IRR, while most junior capital in German cently as 2008 to fully €35.2bn change in the LTV ratios in London City 9:00 Luxembourg 9:00 Edinburgh Stockholm 9:00 offers only 6%-9%. “That is why we have in 2015, says the study, pro- the sector, which had fallen London West 9:15 End Amsterdam, Barcelona, Madrid Moscow hardly seen any deals by foreign credit duced by ZIA together with by 2016 to 53% from 66% in Munich 10:15 Stuttgart 10:30 Warsaw funds in Germany,” said Flatow. “They specialist capital market re- 2009. According to Dexne, “It Hamburg 11:00 Budapest, Milan Geneva, St Petersburg Frankfurt 11:15 can succeed in countries like the Neth- search house Barkow Con- is true that the level of debt is Cologne 11:30 Kiev Lyon 12:00 Lisbon, Paris CBD erlands, UK and Spain as these financing sulting. The study analysed 18 German higher among German listed companies Oslo 12:00 Athens, Bucharest, Dusseldorf, Brussels Helsinki, Istanbul, Prague, Rome, markets have different degrees of maturi- listed property companies, who collec- than the European average of 38%, but Zurich ty to that in Germany.” tively represent 82% of the weighting of history and experience shows that listed Source: JLL, January 2016 Another key factor, apart from the ab- the DIMAX real estate share index. property companies do value stable in- 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. solute size of the market, is the accessi- The sector has become noticeably vestments with high levels of their own Neither JLL nor any of its affiliates accept any liability or responsibility for the accuracy or completeness of the information contained herein. bility to the larger deals. “This is where we more visible in Germany, with the entry of equity, despite the extremely favourable see the largest obstacle for credit funds Vonovia into the DAX 30 last year repre- interest rate environment at the moment.” 12 13 www.refire-online.com

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Flatow AdvisoryPartners

Linsin also pointed to the sector’s ini- gian AKG Invest AS, with July, generating€200m tial prime yields of 6.25%, which outstrip Ziegert Bank- und Immo- for the company). The the risk-less reference interest rate by bilienconsulting brokering Tel Aviv-listed Ado 5.6%, the more management-intensive the deal. Group remains a 36% hotel sector by 1.25% and prime offic- REFIRE visited Ado shareholder in the Ger- es by 2.13%. This is the same level as Properties in Berlin recently man group. 2014, although down on the 7% avaiable to get an update since the in 2013. Linsin sees this falling again company presented its nine-months fig- REFIRE: The company is well posi- this year towards 6%, but says this yield ures for 2015. It now owns and manages tioned, in our view, as a pure play on Ber- compression is much less pronounced more than 16,000 residential units exclu- lin residential. Given the political efforts than in other top products such as down- sively in Berlin, mainly in central districts. in the capital to dampen down rent rise town retail or office properties. Four months after its stock exchange expectations by a variety of measures listing last year, the 10-year-old company designed to promote affordability, this is managed to double its FFO to €22m after not a given. Nonetheless, we were im- Germany/Listed Companies a spate of acquisitions, with CEO Rabin pressed by the company’s commitment Listed Berlin specialist Ado Savion (pictured, above) confirming FFO to micro-managing its assets and inte- Properties poised for further guidance for the full year of €30m. grating IT and customer service systems growth At the end of September, ADO Prop- designed to know everything about both erties owned 14,600 apartments in the market rents and maximum permissible Listed Berlin residential property special- capital valued at €1.2bn, up from 6,600 rents across its holdings. THE UNIQUE OVERVIEW ist Ado Properties has bought the “Nor- at the end of 2014. (Property advisor This level of sophistication is among dic Tower” in Berlin-Hohenschönhausen. CBRE has since revalued the portfolio the highest we have seen among hous- FINANCING · MEZZANINE · EQUITY · CAPITAL MARKETS The high-rise property, which was refur- upwards, to €1.3bn, before subsequent ing management companies, and helps bished in 2012, contains 136 residential acquisitions). The company’s LTV ratio is explain why Ado managed to increase units and six commercial units with a to- 41.8%, and its net asset value is €20.54, its average in-place rent per month to tal floor area of 8,330 sqm und is com- while the share price is trading at about €5.75/sqm, reflecting an average annual pletely164_RZ_ leased. Refire_125x87_Vs2_REAG The seller is the Norwe 07.01.16- 15:36€26.50 Seite (The 1 company listed at €20.00 in rental growth of 6.5% on a like-for-like basis. The vacancy rate dropped 3%, like-for-like, and currently stands at 4%. The customer-centric approach certain- ly helps here too, as does a company Professional Excellence culture more akin to a software growth company than a classic residential REAG is an independent consultancy specialising in real estate. Our professional team in Europe property and facility manager. The mar- provides services to national and international clients primarily in the following fields: ket seems to like the company as well, offering strong support for the shares • Appraisal since last year’s IPO. • Investment Advisory • Debt Advisory bauchundbrain.de • Technical Services Germany/Brokerage • Environmental Due Diligence Law change sees shakeout FAP-finance.com • Asset Management Support in German broker industry

Contact details: Germany’s ruling coalition government REAG Real Estate Advisory Group in Berlin has brought in two significant Bockenheimer Landstraße 22, 60323 Frankfurt/Main For appointments please contact us by email > [email protected] Tel. +49(0)6924752670, www.reag-dp.com changes to the domestic residential AVAILABLE AT EXPOREAL or phone > > > +49 30-844 159 490 housing market in this legislation peri- od. The first was the Mietpreisbremse, Regulated by RICS or rental cap, which limits the amount a landlord can increase the rent on a new

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Even a small team can leverage big deals.

More than 40 successfully completed projects. Total transac8on volume of more than 2.2 billion Euros. lease to a prescribed percentage. to benefit the consumer i.e. the tenant. known for its stiff requirement for exam- The other new instrument is the so- One reason is that the landlord is now inations and certificates in almost every called Bestellerprinzip, or “He who or- frequently tempted to let out the apart- other line of activity). The official body ders, pays” in respect of a broker’s ment himself, cutting out the middleman. IVD has more than 6,000 members, but commission. This breaks with the almost This frequently means more new lettings there are certainly tens of thousands universal tradition in Germany that the being sorted out ‘under the table’, with more who’ve sprung up since the onset landlord commisions the agent to lease the exiting tenant directly finding a sub- of Germany’s property boom and may the property, but the tenant pays the bro- stitute. Or the landlord simply decides to be dealing with property on a part-time kers’ commission – essentially a win-win sell the unit, instead of re-renting it. or inofficial basis. Most have no official situation for the landlord. But perhaps the biggest drawback training or relevant professional knowl- The previous status quo, where the from the potential tenant’s perspective edge. tenant paid the commission in every is this: no broker can now offer a range These are the people who will have case, even when the broker was of- of apartments from been hardest hit by the change in the fering a property into a market with his stock – he has to law since June 2015. A study carried out high demand, such as in university organise, each time among 1100 brokers by industry trade cities, and offered no - or very little he’s asked, an avail- journal Immobilien Zeitung, online portal - added-value, has been in no small able apartment from Immobilienscout24 and consultancy measure to blame for the miserable a landlord that is not group Immo Media Consult confirmed reputation that the broker ‘profes- being offered by any that life since had changed for them dra- sion’ enjoys in Germany other broker else- matically; 84% of respondents confirmed Six months after the introduction where. Schick says that their turnover had fallen consider- Our achievements are based on: of the new law, and in the absence of this has drastically ably, while 47% of respondents claimed any in-depth research study, it’s still reduced the amount their very existence was now in peril. structured processes, too early to say definitively what ef- of choice any broker It does indeed look like the ‘black a comprehensive consul8ng approach, fect the measures are having on the can offer to his poten- sheep’ and amateur, unqualified advisors broker industry. The idea of course was tial client. Germany’s strict laws defining are being driven out of the industry, in fa- our extensive database to ensure a fairer market and ultimately who has first offered a unit for rent, and vour of those who are prepared to gain lower the burden on tenants in finding the likely possibility of losing a commis- basic qualifications, which the govern- and, not least – our smoothly func8oning team. new accomodation. sion on a deal because another broker ment is in the process of establishing, as Jürgen Michael Schick of the Prop- has offered it first, has driven several rep- a minimum hurdle for those who wish to erty Owners Association IVD, (pictured, utable brokers to quit offering any apart- call themselves ‘property brokers’. above Please contact us: ) whom we often meet and quote in ments at all to tenants, instead concen- Existing brokers will then have to sit these pages, takes the understandable trating on pure sales. for the local Chamber of Commerce ex- view that the new law is hostile to land- When the new law was introduced ams and up their degree of professional lords, and represents a further ideologi- last year, critics warned that brokers competence and certifiable experience. cal blow against the real estate industry would try to get around the restriction by All in the interests of higher standards Office Osnabrueck Office Jena by the current government. Instead of invoicing the landlord a smaller amount across the board, says Schick of the IVD. Luermannstrasse 25 Zeitzer Strasse 2 being the ‘honest broker’ as before, he for their services, but making up for it D-49076 Osnabrueck, Germany D-07743 Jena, Germany argues, brokers are now practically com- by demanding a higher amount for tak- Phone: +49 (0) 541 – 66 85 86 0 Phone: +49 (0) 3641 – 62 88 60 pelled to act unilaterally in the interest of ing over existing furnishings, e.g. built-in Germany/Residential real estate Fax: +49 (0) 541 – 66 85 86 20 Fax: +49 (0) 3641 – 62 88 61 1 their paymasters, the landlords. kitchens, which are not normally includ- Industria Wohnen plans fur- [email protected] [email protected] Although there is anecdotal evidence ed in a new lease. Germany’s Tenants ther €300m new deals in 2016 that the amount of broker commission Association (Mieterbund) says it has not has fallen under the new regime to as low noticed any abnormal wave of new com- The Frankfurt-based residential investor as one month or one-and-a-half month’s plaints about this dodgy practice since and fund manager Industria Wohnen rent (plus VAT), instead of the previous at the change came into effect. transacted €475m of deals in Germany least two months rent (plus VAT, i.e. 2.38 The amount of property brokers in throughtout 2015, a rise of 40% on the www.JenAcon.com months rent), Schick argues that the Germany is not known exactly, since previous year. The group has set asid apparent lowering of the commission is barriers to entry into the business are €300m for investment on forward deals nonetheless a Pyrrhic victory in the battle minimal (almost exceptional in Germany, on developments for 2016. 16 17 www.refire-online.com

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Of last year’s figure, €424m of this was about equal proportions.” Fokus Wohnen Deutschland, which is % of the financing was for property deals folio during 2015 from €500m to €1.6bn. Germany/Residential Real Estate in new acquisitions. Assets under man- With an eye on the many competitors open to private and semi-professional within Germany., with the rest abroad. The rapid growth, Publity said, was Conwert renews focus on agement increased by 45% from €925m looking for exposure to German residen- investors and collected over €26m equi- The bank, which is owned by the Spar- due to its business model of acquiring residential, plans more com- to €1.35bn at the end of the year, with the tial, Niewöhner-Pape said Industria plans ty since launch in August. It has already kassen, or savings banks network, spe- high-yielding office and commercial prop- mercial RE sales number of apartments the group manag- to intensify its co-operation with devel- invested €36m towards its ultimate target cialises in large-volume property finance erties in Germany through joint ventures es rising 20% to 15,000. Staff numbers opers – existing partners and new ones of €500m. for professional investors and housing with institutional investors, in what it de- The Vienna-listed residential and com- at the group rose by 15 to a total of 80. – to secure projects in forward deals. associations, and creates products for scribes as its “manage to core” strategy. mercial property investor Conwert Im- Industria, a subsidiary of Degus- “With the acquisition of project develop- its members, the savings banks. It said Publity acts as a co-investor alongside mobilien Invest said it surpassed its sa Bank in association with Hamburg ments at an early stage, including taking Germany/Financing that in addition to its classical syndicated either German or international institution- sales target for non-core assets during private bank M.M. Warburg, manages a minority share and helping to secure Strong rise in 2015 new business with the savings banks, Berlin al capital and takes charge of the asset 2015, and expects a further €300-350m five property Special AIF Funds, mainly financing, we are offering an attractive lending from Berlin Hyp Hyp placed seven ImmoSchuldscheine, a management, which gives it added in- of disposals this year. In a statement the underwritten by pension schemes, with partnership for developers,” he said. special form of participation developed centive to profit from the eventual sale of company said it sold €234m of non-core assets worth €1.16bn. The €700m in The key issue will be the ability to German real estate financier Berlin Hyp by the property lender particularly for the assets. It describes this as its “manage to properties last year, well above its initial committed equity are 95% invested and secure assets at sustainable pricing, he had another strong year in 2015, raising its savings banks. These represent a combi- core” strategy. target of €150-200m of disposals. further commitments are already agreed. added, given that demand for good as- volume of new business lending by 10% nation of a classic promissory note with In a statement Publity said that the port- According to According to Klaus Niewöhner-Pape, sets significantly outstrips supply. over 2014. New loans amounted to a total a backing from mortgages on property, folio increase of 220% over a 12-month Wolfgang Beck, Industria Wohnen’s managing director, In its privatisation business, Industria of €5.4bn (from 2014’s €5.0bn), of which and are designed to give the Sparkassen period underlined the company’s position (pictured, right) “We have greatly expanded the business sold 588 units last year. It also launched €1.0bn (previous year also €1.0 billion) a low risk diversification option for the as one of the fastest growing asset man- Conwert’s CEO, with institutional and private investors in an open-end property mutual fund, was for long-term extensions. Around 75 risks in their own portfolios. agers in the German commercial real es- “Disposals in the The bank has also been gaining atten- tate market. The company said its goal is commercial sec- tion for its Green Pfandbriefe, a fast-grow- to have €5bn of AUM by the end of 2017. tor and portfolio ing segment of the covered bonds mar- Turnover doubled over 2014 to €23m, streamlining in ket designed to mobilise bond markets profit grew to €13.0bn from €2.8bn in the the residential for climate change solutions, by reducing previous year, while EBIT quadrupled sector are an the cost of capital and improving secu- from €4.7m to €20.7m important part of rity for climate-related investments of ‘We not only predicted a significant in- our strategy. We are focusing on the res- pesnion and insurance funds. crease in our assets under management idential market in Germany and Austria, Soon-to-be outgoing bank chairman in 2015, we also delivered on this com- which has proven to hold the greatest Jan Bettink commented on the bank’s mitment. We will continue to grow rapidly growth potential for us and we want to strategy after a major restructuring over and strongly in 2016 and 2017 due to our continue to invest here.” YOUR GATEWAY TO GERMAN REAL ESTATE the last two years, which we covered fre- unique market position and strong invest- Disposals include the entire portfolio quently in these pages. “We consider it ment partners,’ CEO Thomas Olek said. in the Czech Republic for around €40m, MORE THAN 15 YEARS TRACK RECORD IN HIGH YIELD REAL ESTATE INVESTMENTS IN GERMANY very important to communicate with our The company’s equity capital also qua- and the sale of other non-core properties BORIS HARDI PRINCIPAL CONSULTING OFFERS: customers on an equal footing and at the drupled in 2015 from €8.3m to €32.6m. for more than €190m, at what the firm same time demonstrate presence. In the CEO Olek owns 70% of the shares, with calls “a slightly postive sales margin”. light of this, we decentralised the Group the rest in free float. Publity is paying out The management team is planning fur- • Market-insight and deal-fronting for international buyers in Germany business last autumn and have also inte- a total of €11m of the annual profit (nearly ther reductions in the non-core holdings • Commercial real estate sales in Germany grated the savings banks advisers in our €13m) to shareholders, or €2.00 per share. in 2016, which is expected to generate • International landlord representation in Germany German branches.” The current share price is about €40.00. sales proceeds of €300m to €350m. Publity also earns from a series of Beck said this will be re-invested in • Identifi cation, asset underwriting and management of asset managers Non-Performing Loan funds which it new residential holding, where and if • Forward-deals and off-market acquistions for foreign investors Germany/Listed Companies set up between 2009 and 2013 to in- good opportunities arise – otherwise • Commercial real estate offerings of single assets Publity triples portfolio size, vest in problem loan portfolios. Its NPL it will be used to pay down debt. “Of quadruples profit Funds 1-5 have already paid out 75%, or course paying down debt brings with it >20 Mio. Euros and portfolios >100 Mio. Euros €83.5m, on loan portfolios with a nominal savings of 2.5% in interest charges – but • Client representation at banks‘ and real estate institutions‘ senior level Another company which surged through- value of €110.8m. Publity was a pioneer in an investment in new apartments brings out 2015, both in terms of assets un- setting up public mutual funds to invest in us a yield of 5% to 6%”, he said. der management and profits, was the the NPL sector, with its “Task Force NPL Despite several false alarms, no ma- www.bhpere.com Leipzig-headquartered and Frankurt-listed Fonds Nr. 1 GmbH” in 2009, with the oth- jor acquisitions were actually carried Publity, which more than trebled its port- er four funds following at annual intervals. out last year, although the company had 18 19 www.refire-online.com

originally planned to buy German resi- Germany/Residential expansion, and will absorb the Grainger ment Partners along with onboarding while selling assets worth €205m, includ- Germany/NPLs dential landlord BGP and its 16,500-unit Heitman sets up European investment team based in Frankfurt, along of a highly talented residential specialist ing a big joint venture portfolio in the third New German NPL and loan portfolio. But Conwert’s board decid- residential fund, absorbs with the final remaining 1,137 German team is indicative of Heitman’s conviction quarter. Overall the group signed new mandates for Silverton Group ed on 6 August 2015 that the proposed last Grainger assets units pending their sell-off. To structure in the merits of this strategy, specifically, lease agreements of 150,000 sqm. transaction was not in the ‘best interests’ the deal, Heitman announced the first the ‘Living Sectors’ – rented residential, Chairman Michael Hahn commented, The Frankfurt NPL workout and special of Conwert and its shareholders. We reported in REFIRE back in November close of its Heitman European Residen- as well as student and senior housing – “In 2016, we are planning to launch at least services group Silverton said this week Conwert was itself, however, uwittingly that UK-listed residential property investor tial Investment Fund which is targeting where we see good relative values.” one institutional and two further mutual AIF that it has won new mandates to handle at the centre of the ongoing consolida- Grainger plc and its partner Heitman from €250m in equity commitments from core The deal comes a week after funds. New investments in the funds busi- two new NPL portfolios secured on Ger- tion wave that swept the listed residential the US had sold their joint venture German and core-plus investors. Grainger’s new CEO Helen Gordon an- ness are to reach up to €250m.” He sees man commercial properties, as well as property sector in Germany last year. In housing portfolio (MH Grainger JV Sarl) to The fund will invest in small- to medi- nounced a renewed focus on the “com- especially good prospects for large-scale further instructions for a €400m perform- April 2015 Conwert’s shareholders reject- an unnamed German investor for a price of um-sized rented residential properties, pelling” private rented sector market in retail across all risk categories. ing loan portfolio. The new mandates ed a €1.2b takeover offer from Deutsche €136m. The sale of the portfolio of 2,500 along with some larger single assets, the UK, where the Newcastle-headquar- Just before Christmas Hahn bought a bring Silverton’s assets under manage- Wohnen, Germany’s second larges resi- units represented a further step towards starting with Germany and the Nether- tered company plans fresh investment of 13,400 sqm retail park in Landshut in Ba- ment to about €2bn. dential investor, itself currently fighting off Grainger’s exit from the German market, lands, where it already has a strong his- more than Stg 850m pounds. varia for its HAHN FCP-FIS German Re- According to Stefan Dölker, director a bid from industry heavyweight Vonovia. after it put its own solely-owned assets on tory and a strong pipeline of suitable as- tail Fund. The centre has been occupied and co-founder of the Silverton Group, On 20 August, two weeks after the the market in September. sets. Heitman is one of the largest private on long-term leases by DIY store Bauhaus “In the past year, only a handful of large decision to drop the acquisition of BGP, Now the Chicago-based Heitman has residential housing owners in Amsterdam, Germany/Retail Real Estate and discounter Penny Markt since the park NPL portfolios came on to the market Adler Real Estate, another German list- bought 1,595 remaining residential units following a recent acquisition. German’s Hahn Gruppe plans opened in 2005. The seller was asset man- and we received the investors’ mandates ed residential landlord, bought a share- (in 110 separate buildings) from Grainger Gordon Black, senior managing direc- €250m new retail funds ager Estama Investment Management for two of them. Last year was also very holding of almost 25% in Conwert from for its own close-end co-mingled fund, lo- tor for Heitman, commented: “Today’s an- on behalf of its principal, the London-based successful for the consultancy side.” British-Israeli businessman Teddy Sagi, cated mainly in Frankfurt and Mannheim. nounced seed investment and the launch The listed Hahn Group, one of Germany’s Edinburgh House. This brings the HAHN In 2015, Silverton advised internation- a share which has since fallen to 23.5%. It says it plans further German residential of Heitman European Residential Invest- leading retail property asset managers, FCP fund up to €600m of assets with 30 al investment banks and opportunistic has ambitious plans for 2016, including at large-scale retail properties, on which it is funds on four transactions, with a total least three new funds vehicles targeting at offering investors a target IRR of 8%. volume of €1.9bn. The vendors were least €250m. Founded in 1982, Hahn manages German credit institutions and clearing The group, based in Bergisch Glad- around €2.4bn in mainly third-party assets banks, as well as international NPL in- bach near Cologne, invested €155m last through funds and projects. It has issued vestors. The company further boosted year in its institutional fund business, over 170 real estate funds. staff numbers last year to 21, and now 20 21 www.refire-online.com

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has offices in Munich, New York and – allows for the development of 70,000 formed about 40 hectares to the north most desirable housing. Benson Elliot partner Philipp Berliner Volksbank eG, Madrid, where yields are expected to be sqm of residential, retail, restaurant of Berlin’s main railway station – an area CA Immo has already developed a Braschel said: “The Europacity with the aim of renovating higher this year, as well as its head office and office space. Benson Elliot plans a which lay derelict for decades – into a number of projects in the quarter, includ- site provides Benson Elliot with both buildings and consol- in Frankfurt. €300m development on the site. new, mixed-use city quarter. The area ing the Tour Total, John F. Kennedy House a unique opportunity to cre- idating them into a single The deal consisted of eight separate lies a short walk from the Bundestag, and the Intercity Hotel. “We plan on con- ate high-quality rental housing headquarters. The total val- plots, which CA Immo had earmarked for various federal ministries, the Charité tinuing this strategy with other initiatives right in the heart of Berlin, whilst ue of the deal was estimat- Germany/Acquisitions divestment as part of its ongoing dispos- (Europe’s biggest university hospital) and including the development of the new making a significant contribu- ed to be €100m. Benson Elliott commits €300m al programme. The company has been Humboldt University. KPMG building,” said CA Immo director tion to the city’s sustainable de- Now Benson Elliot is sell- to Berlin site from CA Immo actively selling assets over the past few Europacity has become a magnet for Guido Schütte. Despite its recent sell-offs velopment. Berlin is going from ing the 6,200 sqm Kürfürsten- months, including plot sales in Berlin, large office users, hotels, retailers and to lower its heavy debt burden, the Austri- strength to strength; together with our strasse property at a 4% rental yield to a UK private equity group Benson El- Regensburg and Düsseldorf, a mixed- cultural facilities (including the iconic an group still controlled assets valued at acquisition last year of Berliner Volks- fund backed by a German professional liot has acquired a 2.5 hectare mixed- use building at Mainz Zollhafen for €66m Hamburger Bahnhof – Museum für €3.6bn in Germany, Austria and eastern bank’s City-West headquarters, our pension scheme advised by Cornerstone use site in central Berlin, fronting the to Aberdeen Asset Management and a Gegenwart). With over two hectares of Europe at end-September last year. Europacity purchase demonstrates our Real Estate Advisors. The Benson Elliot Spandauer Schifffahrtskanal, from listed 50% share in Poleczki Business Park in Europacity devoted to parks, and a kilo- Benson Elliot and its joint venture ongoing commitment to Berlin as an in- fund, BEREP IV, will reap an opportunistic Austrian property company CA Immo. Warsaw to its Vienna-based joint venture metre of waterfront along the Spandauer partner Kauri CAB Development in- vestment destination.” 2.4 multiple on its investment. The off-market acquisition in Europacity partner UBM for over €80m. Schifffahrtskanal, Europacity has also tend to create a lively and attractive ur- Earlier in January Benson Elliot took Industry veteran Marc Mogull (pic- – Berlin’s largest urban renewal project The Europacity project has trans- seen the development of some of Berlin’s ban residential quarter, fully integrated advantage of an unsolicited offer to sell tured, above), Benson Elliot’s managing into Europacity’s working, living, cultural an office building in Berlin’s prime City partner, commented: “We stock-pick and recreational network. Current plans West district, at Kurfürstenstrasse and our investments for growth, but we need Guest Column: are for the construction of around 500 Budapester Strasse. It had only bought to be nimble enough to shift strategy Dr. Thomas Herr, Managing Director of VALTEQ Gesellschaft mbH multi-family rental apartment units, on the eight-storey building, along with an when opportunity comes knocking. At Energy-related building refurbishment: top of ground floor restaurants and cafes. adjoining property, in March last year the end of the day we’re performance Potential with obstacles The project will also incorporate 10,000 in a joint venture with Klingsöhr Pro- driven, not AUM driven. This disposal sqm of commercial and mixed-use space, jektentwicklung and Rockstone Real will enable us to make an early distri- The federal government’s climate So why have extensive energy-related goals are certainly ambitious. By refurbishments failed to materialise? together with a day-care centre. First oc- Estate. The two assets were acquired in bution to investors, and to recycle the 2030, greenhouse gas emissions On the one hand, the current low cupancy is expected in early 2018. a sale-and-leaseback transaction from profits into other opportunities.” are to be reduced by 55% compared energy costs give rise to a situation with 1990 levels. In achieving this in which it is more economical to goal, the powers that be see real continue running inefficient buildings estate owners as bearing part of the as they are – at least by short-term PAMERA is now CORNERSTONE www.valteq.de responsibility, irrespective of whether thinking. On the other, energy-related Real Estate Advisers they hold large portfolios or are simple remediation measures often only pay home-owners. In this respect, the off over a period of many years, whilst buzzword is energy-related building the costs themselves are incurred refurbishment. immediately. For older owners, in expedient measures, through We are your competent contact – and now worldwide Christoph Wittkop particular, these investments will no selection of the correct materials Cornerstone Real Estate Advisers Managing Director Country Head The federal government is aiming for longer be redeemed. Furthermore, and right up to the achievement of » One of the largest global real estate investment Germany a refurbishment rate equal to two there are often additional costs a functioning overall concept. Omit managers [email protected] percent of the residential building for repair measures that must be this step and costly corrections may » Over 44 bn Euro of assets under management, stock per year. At present, however, executed during the course of the be the result – a thought that neither including 3.1 bn Euro in Europe1 energy-efficiency upgrades are only energy-related improvements. private owners nor investors are likely » 215 institutional investors and clients1 Gunther Deutsch carried out in around one percent of to find attractive. » Strong local presence, with offices in the USA, Europe Managing Director these properties. This is not just a A further factor is the fear of errors and Europe and Asia London Head of Investment Amsterdam [email protected] problem for the federal government potential consequential costs. When You should therefore seek the » Offices, Retail, Residential, Hotel and Light Rotterdam United States but, at first glance, is also very strange; correctly executed, the profitability assistance of a competent partner Industrial Stockholm Berlin 8 offices Helsinki Dusseldorf the conditions for refurbishments of a building can indeed be boosted. for the optimisation of your property. » Core and Value-Add strategies (Funds, Matthias Gerloff Separate Accounts, Financing) Milan Frankfurt Asia have seldom appeared so favourable. The risk of incorrect execution is VALTEQ has many years of experience Paris (from the end of 2015) Hamburg Tokyo Managing Director Head of Institutional The current low-interest phase high, though, given the often highly in the field of energy-related building » A member of the MassMutual Financial Group Madrid (from the end of 2015) Munich Hong Kong Investment Solutions facilitates affordable financing and, complex requirements. There is a refurbishment and can help you 1 As at 31 March 2015 [email protected] at the same time, state subsidies are need for technical planning, beginning achieve the best-possible results for available. with the definition of economically your real estate. Berlin . Dusseldorf . Frankfurt . Hamburg . Munich www.cornerstoneadvisers.de

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pearls” very challenging. Against Europe in 2016. They are substanti- If you had one prediction for the Eu- this background it’s our strategy to ally important not only on the “buy” ropean commercial property market choose selected investments which but also on the “sales side” with in 2016 what would that be? meet our client’s as well as our own respect to market liquidity. There standards for long-term, sustainable are an increasing number of foreign The European property market profits investments. These are not only core/ investors appearing as sellers. They from a number of overall positive WE BELIEVE THE TRADITIONAL core+ assets but also assets in need of are the ones who entered the mar- conditions such as positive econo- active asset management and repo- ket at an early stage of the cycle to mic growth, low interest rates and INVESTMENT CRITERIA TO sitioning. In this context Germany retain their profits. In addition, as key excessive supply of money. These remains our focal market where we interest rates and returns on govern- stable conditions support real estate’s can benefit from our local expertise. ment bonds have started to rise in the reputation as “safe hafen” against the REMAIN AS RELEVANT AS EVER However, there are some markets in U.S., some investors may switch to backdrop of uncertainties in other the periphery of Europe such as Mar- bonds. Furthermore some sovereign assets classes. We do however see seille, Helsinki or Budapest, which wealth funds, especially from coun- turbulences in the global economy are “laggers” in the investment cycle tries which are heavily affected by the and capital markets clouding the sky. London well and truly dominated doubling compared to previous year. offering more return at higher risks. fall in commodity prices, have less This will most likely have an impact commercial property investment The German capital is also growing These may the ones to look out for. purchasing power available. on the letting and subsequent on the volumes in 2015. Do you see this in economic power and population, Despite these potential restrictions, investment markets. continuing or will other European but it holds no monocentric position Outside investment has played a there remains a strong positive yield cities feature more prominently in in the country as London or Paris do significant role in the European gap for real estate compared to 2016? therefore posing no serious challenge real estate market’s recovery in the government bonds and weakening to London either. last few years. How do you see this stock markets resulting in ongoing London will remain the primary in- trend evolving in 2016? Who will be demand for European real estate by vestment destination. It is a gateway Liveability, sustainability and investing? international investors. However, the for international investors coming technological progress have been major inflow of money can be ex- into Europe due to market size, key considerations in European European and international investor pected intraregional from European liquidity and transparency. Despite investment strategies in 2015. What will still play a significant role in sources of capital. some investors showing uncertainty factors do you see dominating the with respect to the “Brexit“, we don’t scene in 2016? expect this to change in 2016. While London has reached top prices levels, “Softer aspects” such as these are this could motivate some of the becoming increasingly important es- Author: potential investors to wait for some pecially for long-term investors – as cooling-down. Others who have ente- new engagements in the current high- Ingo Hartlief, red the market will increasingly start peak market situation need validation Member of the Board, selling assets. However, we don’t by state-of-the-art, sustainable pro- expect this to slow down the market perties. However, the high transac- CORPUS SIREO overall. tion volumes in Europe indicate that Asset Management only few investors were able to buy Commercial GmbH Furthermore, London is without seri- “Grade A” properties fulfilling these ous competition in Europe. The city’s requirements in 2015. Therefore we major European competitor, the Gre- believe the traditional investment ater Paris area, suffers from the weak criteria to remain as relevant as ever. economy in France. Its commercial transaction volume increased only Looking more closely at distinct slightly to roughly € 19bn in 2015. sectors (office, retail, industrial/lo- This underlines the relative weakness gistics and hotel) are there specific of the market. The strong German markets you see as having signi- economy on the other hand promotes ficant potential for 2016? Where the commercial investment market, would you be investing?! but the total volume of circa € 55bn only breaks down to a number of All of these sectors have reached locations. Berlin has seen invest- top-end price levels. This makes ments of roughly € 8bn in 2015 – a hunting for extra yields and “hidden

Sponsored Statement Sponsored Statement 24 25 www.refire-online.com

from page 21

Germany/Acquisitions tified and/or are REFIRE met recently with new IC Im- The successful bidder in the end was the rest of the building is thought to be Immobilien a year M7 buys German offices, com- under offer on a mobilien boss Markus Reinert, whom the Berlin-based construction compa- empty – so a major repositioning is inev- ago. He’s popped pletes €130m in fresh deals number of other we’ve known going back a number of ny PBM Germany, who was thought to itably on the cards. up as the new own- transactions and years. He’s clearly intent on expanding have paid more than €100m. Information The Goldman Sachs Whitehall Fund er of third division In four transactions totaling €130mn, we intend to be the group’s competence in asset and is sparse on the company’s website, but bought the property in 2007 from the footbal team Han- pan-European investor and asset man- fully invested by property management, including gaining it describes itself as “ one of the lead- then Degi open-ended Grundwert fund sa Rostock, as ager M7 Real Estate has bought 21 end 2Q16.” new large mandates from international ing companies in the field of entrepre- as part of a portfolio acquisition (the an investor in fin- office and retail properties in Germany The M7 EREIP investors. neurship, construction and development “Spring Portfolio”), which put a valua- tech startup Creditshelf, which provides and the Netherlands for its new Europe- III fund has a Value-Add strategy and tar- IC Immobilien will remain rooted in its in Europe, Germany, the Netherlands, tion then on the FBC tower of €327m. loans to mid-sized companies – and now, an Real Estate Investment Partners III gets assets that offer both sustainable core competencies of property and as- Belgium, Sweden and Eastern Europe, as the chairman and main shareholder in fund (EREIP III). The portfolio, with a 21% income streams and asset management set management, he says, but, “Over the engaging in the entire spectrum of en- a new arrival on the German REIT scene, vacancy rate, currently generates a rent- opportunities in the retail, office and the next three to five years we want to dou- gineering works”. The company was es- Germany/REITs Deutsche Konsum Reit-AG. al income of €13.2mn. multi-let industrial sectors in both Ger- ble our turnover in our core business of tablished in 1989. Ex-TAG Immobilien boss Elgeti The new company, headquartered in The company bought three portfolios many and the Netherlands. The Lon- full-service property and asset manage- Market observers in Frankfurt estimat- returns with new retail REIT Potsdam, has already invested in 30 retail and a single asset, housing 143 different don-based group, founded in 2009 and ment, which makes up half of our overall ed the price at about €2,000 per sqm. outlets as part of its development strate- tenants. The properties have a vacancy wholly-owned by its senior managers, business”, (beside fund management). The building has a long history in Frank- German property company Wunderkind gy. Elgeti describes the plan as” buying rate of 21% that will allow M7 to increase operates in the UK, Denmark, the Neth- The company operates from seven lo- furt, and does loook in need of a major Rolf Elgeti (pictured, right) seems to be local retail properties for everyday needs income through lettings at a very modest erlands, France, Germany, Poland and cations across Germany with 250 staff, overhaul. Law firmClifford Chance is the making a comeback in a variety of entre- across the country in sustainable mi- level of capex. The German assets com- the Czech Republic and manages more than 800 properties main tenant with about 20,000 sqm and preneurial guises since departing from cro-locations including in B- and C-cities, prise the Riva Portfolio from listed Eu- valued at more than €10bn. a lease that runs until 2019, but much of listed residential property company TAG with at least two main anchor tenants.” rocastle, which is currently exiting from The company is clearly aiming to po- nearly all its European engagements Germany/Asset Management sition itself as a partner for the biggest apart from Italy. IC Immobilien raising German institutional investors in Germany, inter- The assets include six multi-let offic- profile for asset, property national or domestic, and Reinert says es – with 21,300 sq.m. of rentable space management he sees growth coming from 70%-80% – in secondary German cities and 11 existing clients, with the rest from new offices and four Dutch retail properties. German fund and asset manager IC mandates and bolt-on acquisitions such The German assets have 21,300 sqm Immobilien has taken over the proper- as the Colliers Property Management in Bonn, Dortmund, Duisburg, Hanover, ty management division of real estate deal. Competent accounting know-how Kassel and Koblenz, and are 70% let to advisor Colliers in Germany in a share is increasingly demanded by the big- German insurer HUK-Coburg. deal, as part of its repositioning in the gest investors, and Reinert cites this as David Ebbrell, head of transactions at market. The deal came into effect at the a major in-house strength, with some 40 M7, said: “These properties present plen- beginning of the year. Colliers staff num- people in Berlin in the group’s IT and ac- ty of opportunities to add value through ber and locations including Munich and counting division. straight-forward asset management ini- Düsseldorf are expected to remain un- tiatives and selected capital expenditure changed, although the Colliers branding against a background of improving oc- will be subsumed into IC Immobilien. Germany/Acquisitions cupier sentiment, a pick-up in demand The Colliers deal will immediately bring Frankfurt’s FBC Tower sold from occupiers and a shortage of good clients such as Art-Invest, AEW Europe to Berlin group PBM quality space in prime locations.” and UniCredit into the IC Immobilien M7 said it has already raised €80m fold. Achim Degen, the managing part- The imminent sale of the Frankfurter in capital commitments for the EREIP III ner of Colliers in Munich and head of the Büro Centre (FBC) skyscraper, in the fund, its largest fund close to date, and German Colliers group commented on middle of Frankfurt’s central business plans to have the fund fully invested by the the sale: :“Our existing network of offices district, had long been flagged but sev- end of this year’s first half. “We are intend- meant that we were not really in a posi- eral bidders were known to have still ac- ing to have a second close during the first tion to offer a seamless service across the tively been involved in the auction pro- half of this year and are targeting a gross whole of Germany. With the IC Immobilien cess pretty much all the way. The seller investment capability of some €330m for Group we have found not only the perfect of the 142m tall tower with 52,000 sqm of the fund,” M7’s CEO Richard Croft (pic- partner, but a partner we can trust to take lettable space is a Whitehall Fund from tured, above) said. “We have already iden- over our property management business.” the Goldman Sachs stable. 26 27 www.refire-online.com

...from page 26 GERMAN REAL ESTATE – How German bidding processes really work The company’s existing portfolio has was not an obvious move, given the Germany/Pension Funds 146,000 sqm and a valuation of €125m, miniscule size of the REIT sector in Ger- Germany’s BVK mandates with a annual rental income of €13.6m. many and its somewhat ‘stillborn’ histo- Hines with €1.3bn retail in- The assets, so far all located in ry. Elgeti commented, “Establishing the vestment eastern Germany, were bought for an company as a REIT has to do with more average multiple of 7.8 times annual than just tax efficiency. The structure Germany’s largest pension fund BVK rent, which Elgeti says is because he’s is particularly suitable for granular and Bayerische Versorgungskammer has looking for assets with short remaining cashflow-strong commercial property mandated the US-based Hines to ex- Avoid wasting time and lease terms, or even high vacancy rates, portfolios like ours, while at the same ecute a €1.3bn separate account pro- money – and double your or those requiring high initial capex or time the strictly-defined REIT regula- gramme, focusing on investment in high chances of success – whose loans are non-performing. The tions send out a signal about the kind of street retail assets across 20 European goal is to get existing tenants to extend quality we’re offering to our investors.” countries. Hines has already bought the with this highly practical their leases because of new invest- Deutsche Konsum REIT-AG has been first asset, a landmark building on Oslo’s new guide to mastering ment in the asset, and so to attract new listed on Berlin’s stock exchange since premier shopping and pedestrian street. how German bidding high-paying tenants to join them. last December. Elgeti as CEO has 45.7% Under the terms of the mandate, processes really work in Individual investment size has been of the shares through various compa- Hines will identify, acquire and manage practice. between €500,000 and €37m, with nies he owns, with other shareholders core-plus, value-add deals for the €62bn €20m the most paid for any single asset. named as the New Zealand-based Next pension plan, as well as development Most fall below the €10m mark. Generation Trust and Lotus Aktienge- and redevelopment opportunities. BVK, Setting the company up as a REIT sellschaft. with €62bn of assets under manage- Clinching the Deal, written by experienced practitioner Joachim Arenth – and published in English by REFIRE Editions – will help you to edge out your competition when buying German property assets, and avoid making costly mistakes.

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ment, said it intends to hold the majority our integrated business model and lever- tise to deliver enhanced capital value to last trading update in December 2015, Germany/REITs of the investments for the long term. age our pan-European platform to focus the investor,” said Hines Europe manag- the company has also sold 3 small retail Dream Global REIT buys The Hines mandate is to encompass on value creation through active asset ing director James Robson. properties for a total consideration of € Vienna property in Asian JV a range of value-added measures, in- management, refurbishments and rede- US group Hines has $87bn of as- 2.4 million, in line with their book value. cluding rental reviews, repositioning and velopment.” sets under management and is already Zohar Levy, Summit’s managing di- re-leasing of units, store reconfiguration BVK is gearing up its investment in well-established in Europe, with invest- rector commented, “The acquired prop- The Toronto-based Dream Global REIT, and light refurbishments. It will also in- property as a proportion of total assets – ments in France, Germany, Ireland, Italy, erties in Munich and Duisburg fit our which is a pure play on German commer- clude major redevelopments, including with a particular emphasis on high street Poland, Spain and UK, as well as Russia. strategy as they are well located, with cial real estate for Canadian investors, has conversions and ground-up develop- retail. According to BVK’s Norman Fack- low capital value and a very stable in- dipped its toe for the first time outside of Located on the Danube waterfront, ments elmann, head of real estate investment come. Together with long-term financing Germany. It has teamed up with an Asian and adjacent to Handelskai station, a key The agreement is the latest in a line management, the sector offers attractive Germany/Listed companies they will improve our cash flow. We con- sovereign wealth fund to buy a 50% in- transit hub, Rivergate comprises 54,000 of mandates and investments on be- fundamentals, and good opportunities Further stable growth at tinue to strengthen our portfolio by dis- terest in the high-profile Rivergate office sqm and comprises two towers connect- half of German pension funds worth to source value-add assets in strategic AIM-listed Summit Germany posing of small and non-strategic prop- complex (pictured, right) in the Austrian ed by an enclosed atrium. The property €1.5bn to Hines over the last two years, locations for long-term investing. “Hines erties while acquiring properties in strong capital Vienna, for a price of €189m. is 95% occupied or committed with a the firm said. Among its deals was the represents the perfect fit for executing The AIM-listed Summit Germany, which locations and we expect to acquire more Dream said the Asian partner, (not weighted average lease term of 7.3 years. 2014 acquisition of Amazon’s London this strategy given the strong track re- focuses on commercial properties in properties in the next few months.” named, although the REIT has prior his- Major tenants include the City of Vienna, headquarters for £245m for a German cord in asset level value creation across Germany’s larger commercial centres, At the end of 2015, Summit Germany tory of selling a 50% share of eight prop- Thales, Global Blue, Grant Thornton, pension fund. Hines also set up the HV a broad range of markets,” he added. added an office building in Munich and owned 103 assets with 860,000 sqm and erties two years ago to the South Korean Sky and Mars. Built in 2010, it was the Trophy Mandate in February 2014 for a The first deal under the mandate was another in Duisburg to its Germany hold- net rent of €57m p.a., at an occupancy Public Officials Benefit Association), first property in Austria to receive LEED German institutional investor with €250m a 5,100 sqm acquisition on Karl Johans ings for a total of €15m. rate of 87%. At mid-2015 the company’s would be its 50% joint venture partner Platinum sustainability certification. of initial equity to buy trophy properties in gate, Oslo’s leading shopping street, The properties consist of 12,000 sqm assets were valued at €582.4m, reflecting in the investment. The cap rate is 5.2%, Dream has also been refinancing its select European and US cities. bought in a sale-leaseback with Land- of lettable area and are fully let to several a rental yield of 8%. Subsequent revalua- with upside potential through leasing and initial German portfolio, which it says will Lars Huber, co-chief executive at kreditt Bank for €52m. “The building in strong tenants with a Weighted Average tions brought the portfolio value to €718m. annual indexations, while Dream will also save it annual debt service costs of more Hines Europe, said: “This is a significant Oslo is typical of the kind we are target- Lease length (WALL) of 6.5 years. The The company has borrowings of earn asset management fees from the than €11m. It refinanced a €244m, five-year mandate for our European business from ing; a well located, retail anchored asset aggregate net rent is about €1.2 million €330m, reflecting an LTV of 46% at an JV. Dream finance the deal with a 5-year facility with Bank of America Merrill Lynch, one of the world’s leading investors in offering both income and importantly, the per annum, reflecting a rental yield of average loan duration of 5.8 years and an interest-only mortgage at a 55% loan-to- that bears a variable interest rate equal to real estate. It enables us to capitalise on opportunity to use our real estate exper- 8.1% on the acquisition cost. Since the average interest rate of 2.8%. value rate, and at an interest rate of 1.6%. three-month EURIBOR capped at a weight-

GRAPH-3 GRAPH-1

250 Total Return Performance GPR 250 Index (€) 150 Total Return Performance GPR 250 Index (€)

GPR 250 Europe

200 GPR 250 Germany

100 150

100

50

GPR 250 Europe 50

GPR 250 Germany

0 0 Dec-10 Jun-11 Dec-11 Jun-12 Dec-12 Jun-13 Dec-13 Jun-14 Dec-14 Jun-15 Dec-15 Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15

Source: Global Property Research (www.globalpropertyresearch.com), 2016 Source: Global Property Research (www.globalpropertyresearch.com), 2016

Page 1 Page 1 Graph of Total Return Performance of Europe and Germany in Euro currency over the past twelve months Graph of the total return performance of Europe and Germany in Euro currency over the past five years Charts courtesy of GPR Global Property Research REFIRE charts courtesy of GPR, Global Property Research 30 31 www.refire-online.com

KRIEGER R EAL ESTATE M ANAGEMENT

AUDITOR· TAX A DVISOR· ATTORNEY ed average 1.03%, and margin of 225bp. Germany/Research traditional measures of annual multiples Europe/Study FRANKFURT AM MAIN · LAMPERTHEIM · BERLIN In a significant deal last November, Empirica sees construction and price/household income ratios have Europe to see largest share of €48bn Dream signed a 20-year lease with the City dampening ‘overheating’ fears shown big leaps, these are countered by global investment in 2016 of Hamburg for the entire 16,000 sqm of rising construction activity, while such space at Hammer Strasse in the city, cur- The independent Berlin-based research cities can generally command a premium Investors will commit at least €48bn to global non-listed real rently occupied by Imtech Deutschland, company empirica has just published on general attractiveness and job-market estate in 2016, up 13% from last year with the lion’s share flow- which filed for insolvency last August. The a report looking at the risk of regional grounds. ing into Europe, a new survey from the three regional groups City of Hamburg will move in in November house price bubbles across Germany. Empirica does raise its red flag for INREV, ANREV and PREA shows. (INREV, which had been 2016, while Dream repositions the proper- While sounding a note of caution for cer- a number of named cities, such as carrying out the survey since 2007, teamed up with its sister ty after Imtech move out in April this year. tain cities, the report concludes that the Bayreuth, Landshut, Regensburg, Trier, organisations in 2014 to provide a more global perspective.) According to Michael Schwöbel, level of new construction is helping to Weiden/Oberpfalz and Coburg. Although More than half of all investors expect to increase property head of real estate Europe for the Cana- dampen the risk of irrational house price swollen by growing numbers of enrolled allocations over the next two years, the associations’ latest dian group, “Signing this lease has helped rises, while reflecting people’s wishes to students, they are unlikely to sustainably Investment Intentions Survey found – due to an enduring ap- us turn the insolvency of a tenant into live in popular urban centres and pay a be able to hold on to all their graduates, petite for property in the quest for long-term income, diver- a value-enhancing opportunitiy for the premium for doing so. and may not be able to justify their high sification and inflation hedging. The average global investor property. The long lease combined with a Empirica’s latest index report con- multiples, price-earnings ratios, and level is targeting an overall real estate allocation of 10.3% over the triple-A covenant will enhance the attrac- cludes that, in 124 of the 402 German of completions, say the researchers. next two years, 90bp ahead of the current 9.4%, with Europe- tiveness of the property and improve the municipalities surveyed, the threat of a Separately, a new market analysis an investors above average at 11.4%. quality and stability of the cash flow.” house price bubble is indeed high, rising published by Commerzbank, Germa- The survey of 345 investors and fund managers with al- Not counting the Vienna acquisition, from 110 in 3Q15 and from only 33 three ny’s second biggest bank, is more critical most €2tr of assets found an enduring appetite for property Dream Global REIT owns and operates years ago. In 199 municipalities, rents and of the level of house price rises particu- in the quest for long-term income, diversification and inflation German assets worth Can$2.6bn, with its purchase prices rose in 4Q15, up from larly in Germany’s biggest cities, where it hedging. Europe and North America are expected to contrib- investment focused on Germany’s seven 189 the previous quarter and 99 in 2012. identifies signs of overheating. However, ute around 40% each of the total real estate capital in 2016, biggest cities. At the end of September It registered excessive new construction it sees the trend of rising prices continu- with Europe forecast to take 41.9% and the US 35.5%. Fund its occupancy rate was 86.8%, up on the volumes only in 14 municipalities. ing through 2016, despite warning signs. of funds managers significantly favour Europe where they in- 85.3% rate of 2014. In Canadian terms, Despite the rapid rise of house and The Commerzbank study says that tend to deploy 59.3% of their capital. the stock at Can$8.05 has been trading apartment prices in Germany’s Big Sev- house prices rose in Germany last year Henri Vuong, INREV’s Director of Research and Market Infor- downwards for much of the past year and en cities, empirica says there is still little by nearly 5%. In Hamburg, Cologne and mation, commented: “Appetite for real estate seems as strong is now about 25% below its book value. danger of price overheating. Although Munich apartment and house prices rose as ever regardless of investor domicile and this year’s Survey by 10%, while Frankfurt and Berlin saw highlights some interesting themes. For example, the appeal of rises of 13% over the previous year. the big European cities remains undiminished. Despite pricing Housing prices over the last five years issues in places such as London, investors clearly feel the bene- have now risen noticeably faster than fit of these mature and relatively liquid markets where it is easier rents and incomes – in the case of in- to invest and therefore easier to avoid cash drag.” comes, house prices have risen nearly Germany remains top destination for investors – with a third faster than household income, 73.5% intending to invest there. France is second at 61.8% which Marco Wagner, the author of the and the UK third with 58.8%. The Netherlands was the target Commerzbank study says is, “without for 39.7%, Belgium 36.8%, Finland 33.8%, Sweden 32.4% question, even without a historical com- and Denmark 32.4%. However fund of funds managers all parison, a property market that’s show- put the UK top with Germany, France and the Netherlands ing clear signs of overstepping itself in sharing second while fund managers rated Germany top at the major cities.” An example is Munich, 65.6%, the UK 64.8% and France 48.4%. where last year households were paying Offices are set to attract 88.2% of investors, retail 77.9%, in- 7.6 times their annual average income for dustrial/logistics 58.8% and residential 54.4% and the survey a normal 80 sqm apartment. found investors continue to move up the risk curve with Commerzbank points to data from the value added now preferred to core. Vuong added: “We Bundesbank showing that provision of could be forgiven for identifying patterns that resemble the mortgage credit has risen 4% over the situation in 2007. However, market composition is very dif- past year, outstripping private household ferent today and the focus seems much more tilted toward income, which rose 3%. long-term income with the stability that that implies.” 32

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