Volume 7, Issue 125, October 3rd 2014 Lone Star set to float commercial Inside REFIRE property specialist TLG Immobilien REFIRE is a specialised report focused on providing market intelligence and back- Now it’s official. After months of speculation, much of it public, the eastern Ger- ground analysis to finance professionals man commercial property specialist TLG Immobilien announced that it plans to in German and continental European real float on the stock market, with its launch set for before the end of this year. TLG’s estate investment. parent company, the US private equity investor Lone Star Group looks like it’s making hay while the sun shines, figuratively. If it happens soon, the launch on Whatever your particular area of speciali- the Prime Standard of the Frankfurt Stock Eschange will follow on from two big sation, we think you’ll find timely, incisive recent internet IPOs (shoe and textile online seller Zalando, and Rocket Internet) information within our pages, helping to in- and relative recent strength across the German listed property sector. form you of the key deals, the numbers, the markets, the players and the people. Issues of new shares should bring in Share buyback at TAG Immobil- €100m for further acquisitions, and it is ien sends strong market signal The areas we focus on are: expected that Lone Star will be looking Much in the news this month has been to raise €500m from its part-flotation. the Hamburg-based listed residential US Funds in Europe Lone Star bought the commercial di- property investor TAG Immobilien AG, European REITs vision of the former Treuhand Liegen- which announced a huge share buyback German Real Estate Finance schaftsgesellschaft from the German program and the imminent departure of German Non-Performing Loans (NPLs) government two years ago for €1.1bn, its star CEO Rolf Elgeti, see page 3 Retail Property Funds including €594m in equity, with the rest Mortgage Securitisation being debt. Deutsche Bank launches new CMBS/RMBS TLG has a mixed portfolio of commer- €700m open-ended fund Privatisations cial properties, including high-profile as- Deutsche Bank subsidiary Deutsche Refinancing sets such as the Kulturbrauerei and the Asset & Wealth Management (formerly Euro-zone Property Financing ‘Spreestern’in Berlin, as well as Dresden’s RREEF) is launching a new €700m Ger- Hotel de Saxe and retail property Zwing- man open-ended real estate fund, the REFIRE has an extensive network of con- er Forum. Prominent blue-chip tenants Grundbesitz Fokus Deutschland. The tacts in the field of continental European include Daimler and software firm SAP, launch date is 1st October. see page 12 real-estate finance, which enables us to along with several government-backed bring you the latest and most relevant news. organisations. Average remaining lease Deutsche Annington joins However, we always want to know more duration is 8 years, and the (EPRA-de- MDAX, adds 5,000 new units about what’s going on in this dynamic sec- fined) vacancy rate is a low 4%. About Germany’s largest residential housing tor, so make sure your company is keeping 35% of its rental income comes from re- company, the listed Bochum-based us informed of your moves. Send your me- tail grocery stores, such as Edeka and Deutsche Annington, took a step closer dia communications to news@refire-online. REWE as well as discounters Aldi and to its long-term goal when it entered the com for our consideration. Lidl. The group’s real estate assets are MDAX at the end of September – the sec- now valued at about €1.5bn and it gener- ond tier of Germany’s largest listed com- ates annual rental income of €118m. panies. The MDAX consists see page 19 CONTENTS in this Issue: With solid cashflow and a conserva- tive approach to its financing, TLG earns German distressed real es- DEALS ROUNDUP / from page 3 a 7.3% FFO yield on its net asset value tate debt on the rise - Study EDITORIAL / page 4 (EPRA NAV) with FFO for the first six The amount of distressed debt in Ger- REPORT - /ROUNDUP page 10 months of this year being €26.0m, up many’s real estate sector is set to rise UPCOMING EVENTS / page 29 6.6% on last year. The company said it modestly, largely as a result of postponed PEOPLE…JOBS…MOVES / planned to pay out 70-80% of its FFO in transactions in the recent past, concludes SUBSCRIPTION FORM / page 34 dividends. the annual “Survey on Real Estate Financing The net proceeds generated by the IPO and Distressed Real Estate Debt in Germa- will be used to finance ‘accretive acquisi- ny”, carried out by Corestate see page 14 2

...... DEALS ROUNDUP

tions’ in line with TLG’s stated strategy to the Berlin government had stumbled a REFIRE expand the office and retail portfolio in its couple of times in its attempts to priva- Real Estate Finance core regions of Berlin, Dresden/Leipzig, tise the whole TLG entity in the preced- Intelligence Report Europe and Rostock on the Baltic coast, where ing couple of years. it has been active for 20 years since re- Lone Star bought the commercial as- unification, as well as sets and TAG Immo- Operating Office for “value-enhancing in- bilien the residential REFIRE “The core portfolio Habsburgerallee 95 vestments into the com- consists of 320 prop- assets from the old 60385 Frankfurt am Main, GERMANY pany’s core portfolio”. erties, many of them Treuhand property Tel: +49-69-49085-785 Victoria Partners business, which by Fax: +49-69-49085-804 upgraded, with a rental Email: [email protected] is acting as indepen- yield of 7.5%. About then had had twenty dent IPO adviser and half the core portfolio years to turn itself into Managing Editor: process coordinator for a well-managed com- Charles Kingston comprises office (36%), Tel: +49-69-49085-785 TLG Immobilien. Banks retail (50%) and ho- pany focused on its Fax: +49-69-49085-804 JP. Morgan and UBS tel assets (15%), with traditional eastern Ger- Cell: +49-172-8572249 will act as joint global man heartland. Email: [email protected] about half in Berlin” coordinators and joint REFIRE has Subscriptions: bookrunners, while Kempen & Co, Com- visited the company at its Berlin head- Tel: +49-69-49085-785 merzbank and HSBC have also been quarters on a number of occasions going Fax: +49-69-49085-804 Email: [email protected] mandated as joint bookrunners. back a few years – the company in our Over this year’s third quarter, TLG view has taken admirable pains to ex- Advertising: bought two further core office assets, in- plain its evolving strategy and its financial Tel: +49-69-49085-785 Fax: +49-69-49085-804 creasing the value of its core portfolio to foundations to its diverse stakeholders, Email: [email protected] €1.4 bn. At the same time it sold 48 non- who are now about to include a range of core properties with an aggregate value private and institutional investors. Editorial Advisory Board: Klaus H. Hausen of €70m, the company said. The remain- REFIRE met recently with finance di- Colm O’Cleirigh, B.Arch.Sci. ing non-core assets, valued at €100m, rector Peter Finkbeiner in his office to Margarete May, Rechtsanwältin are marked down to be sold in the near discuss TLG’s approach to financing. David Scrimgeour, MBE Christian Graf von Wedel future. Finkbeiner’s banking and private equi- Glenn J. Day FRICS The core portfolio now consists of 320 ty background left little doubt that the Andreas Lehner properties, many of them upgraded, with finance function within TLG has clearly Stefan Engberg, MRICS an in-place rental yield of 7.5%. About been streamlined and simplified since Publisher: half the core portfolio comprises office the Lone Star takeover, with (presum- REFIRE Ltd., (36%), retail (50%) and hotel assets ably) clearer lines of reporting to a pri- 49 Sandymount Avenue, Ballsbridge (15%), with about vate equity parent than to Dublin 4, Ireland half located in Ber- the myriad political inter- lin. When Lone Star ests that had to be kept in Real Estate Finance Intelligence Report Europe bought the portfolio the loop in the old state- (REFIRE) is published 22 times a year, at the be- ginning and in the middle of each month, with two years ago it had owned days. It was very two holiday breaks. REFIRE is editorially inde- 780 assets across refreshing. pendent of any selling or investing institutions. In- the full commercial Finkbeiner described formation contained in REFIRE is under copyright protection and is based on sources believed to property spectrum. what almost sounds like a return to be reliable, though their complete accuracy can- the old days of relationship banking – not be fully guaranteed. Neither the information REFIRE: This looks like a very lu- having deeper and more reliable rela- contained in REFIRE nor the opinions expressed therein constitute or are to be construed as con- crative part-exit for Lone Star, who are tionships with a handful of banks who stituting an offer or solicitation of an offer to buy likely to hold on to a good chunk of TLG understand your business and who can or sell investments. REFIRE accepts no liability even after the capital raising and IPO. react quickly in competitive situations. for actions based on the information herein. TLG Immobilien has been trimmed, His views underpin the argument that © 2014 REFIRE Ltd. slimmed and focused since Lone Star German banks are getting back into bought the group two years ago, after the driving seat and seeking closer re- 3 www.refire-online.com

The 1st Annual REFIRE German-Chinese Real Estate Forum

REFIRE is bringing top German real estate companies to Hong Kong and mainland China to meet with outbound Chinese investors.

The German real estate market has become increasingly In order to open up new levels of dialogue between attractive for global investors – not only because of its Germany and China in the important area of real estate depth across all asset categories, but also because of investment, REFIRE is planning a series of one-day con- the safety and stability of the market for long-term in- ferences in China to introduce Chinese investors to the vestors. German market.

Increasingly, Chinese companies are looking at the Ger- The events will be attended by top executives from Ger- man market, and a number of significant deals have al- man real estate companies and Chinese investor groups. ready been transacted. With our Chinese partner, the Beijing event will take pla- ce behind closed doors with leading Chinese investor groups in attendance. Further details will follow.

Event Schedule

January 19th 2015 January 21st 2015 January 23rd 2015 HONG KONG BEIJING SHANGHAI

Contact us today to receive more information about the first annual REFIRE real estate forum:

Contact Person: Sonja Kury Email: [email protected] Phone: +86 185 1636 0683 Web: www.refire-online.com/china WeChat 4

...... EDITORIAL

The Mietpreisbremse, like higher rents themselves, is here to stay

Although the Expo REAL in Munich Deutsche Annington, warned recently at tially alleviated through new, much-need- is primarily an event whose a gathering that REFIRE attended ed construction. Housing completions principal focus is commercial of the imperative to limit the law to rose in 2010 by 2%, by 14.6% in 2011, by property, there are inevitably the agreed five-year period. The 9.5% in 2012 and by 7.2% in 2013. But discussions about the state mathematics of being an institu- many new developments are selling out of the German residential tional investor in German housing slowly now, with potential buyers balk- housing market. That’s partly simply will not work otherwise, he ing at the frothy prices demanded. Rent because there is a significant said. Investors are still shrugging levels are unlikely to fall much, however; commercial component in off their concerns, if they have Germans - whether owners or tenants – the German residential sec- any, and appear content to ride are getting used to paying a higher per- tor, due to the particularity of along on the recent forward mo- centage of their net pay for their accom- housing portfolio transactions, and the mentum of the listed and unlisted hous- modation, for better or for worse. nature of Germany’s listed property ing sectors for the time being. The rule of thumb is that the so-called sector, which is now heavily weighted If it will be more difficult to make money ‘cold’ rent, excluding utilities, should not towards residential. in housing in the coming years, it should cost more than a third of the household’s Last week saw the official passing of have been easy in Germany for the past disposable monthly income. A recent the draft bill to cap rental increases (the five years, what with the market’s hefty survey by leading property portal Im- Mietpreisbremse) in German urban ar- price and rent increases and the cost of monet shows that this relationship large- eas that are described as ‘tight’ housing money being practically free, right? Not ly holds across the country, with two no- markets. It will take some time for the for most people. As we report in this is- table exceptions – Hamburg and Berlin. individual Länder to implement the new sue, Germany’s prestigious DIW Deut- Both cities are highly desirable, and ten- law in pre-defined areas, and its imple- sche Institut für Wirtschaftsförderung ants seem willing to pay up to half their mentation will be a bone of contention carried out a study for listed property income for the privilege of living in such for litigious landlords and disgruntled group Wertgrund on the actual returns attractive environments. tenants for years to come. Nominally the achieved by private investors in German But as a recent study by Deutsche law is designed to defuse what is con- real estate over the past ten years. Hypo shows, generalisations about the sidered a ‘temporary’ situation, such as A third of all investors earned less overall market are proving much less help- we are experiencing now after several than 0% yield, the survey found. A fur- ful than local analysis of the widely diverg- years of steady upward rent increases, ther 21% earned less than 2% gross ing patterns from one German city to the and the legislation envisages the mea- yield annually, below the rate of inflation. next. Much of the new construction in the sure being phased out after five years. Barely half of all private property inves- cities is affordable only for the higher-earn- Experience suggests that this rare- tors were able to outpace inflation with ing segment of the population – the sys- ly happens in practice. What DOES their property investments, a miserable tem is falling down, however, in providing happen is that it tends to fuse into the quota over a period which includes a adequate accommodation for lower earn- prevailing legislation, and in five years number of years of steady price rises. ers, leading to the inevitable backlash that becomes almost indistinguishable from Thomas Meyer of Wertgrund puts the produces the aberrant Mietpreisbremse, the myriad other clauses in the land- poor performance down to investors’ a measure likely to further exacerbate a lord/tenant relationship, so that nobody grossly underestimating the frictional problem it was designed to resolve. can quite remember what was intro- costs of ownership, such as involuntary There are several proposals afoot, duced when and for what reason. By vacancies, tenant handovers and the on- from amongst others, Hanover’s Pestel then it’s simply part of an overall body going cost of maintenance. With trans- Institute and the IW in Cologne on which of constraints and restrictions that will actional costs on acquisition of 12-15% we have reported in these pages (and make being a residential landlord a less for taxes, lawyers, broker commissions will return to), for providing tax incentives attractive proposition. and other sundry charges not unusual, it designed to increase affordable housing. With newly-built housing, and hous- can be difficult to come out ahead. In the current buoyant German climate, ing that has undergone extensive re- Indeed, there are strong indications sadly, messing around with the tax code furbishment to comply with Germany’s now that the overall market may have is viewed by the coalition government as draconian energy-saving ambitions peaked, just as measures to deal with its likely to add fuel to the boom, and will being exempted from the soon-to-be- alleged overheating show up like an un- simply not happen in this legislative peri- imposed rental caps, the outcry from wanted houseguest, right at the moment od. Higher rent levels are – for now - here the real estate industry has remained when everybody else is leaving. The pre- to stay. muted. Rolf Buch, the new top man at vious supply bottleneck has been par- Charles Kingston, Editor 5 www.refire-online.com

lationships with key clients, despite the average loan maturities of 5.9 years. Germany/Listed companies much-cited threat of the rise of alterna- Currently 94% of its loan obligations Share buyback at TAG Immo- tive lenders, such as insurance compa- are at fixed rates or are covered by bilien sends strong market nies and pension funds. interest rate swaps, so minimising the signal It certainly looked as if not too many risk of nasty surprises. Net LTV ratio is of these new lenders are making in- currently 47%, well within TLG’s own Much in the news this month has been roads at the big listed companies. Not guidelines of 45-50%. FFO is forecast the Hamburg-based listed residential surprisingly, for many of these alter- to rise further again next year as a result property investor TAG Immobilien AG, native lenders, their narrow focus on of cost savings and new acquisitions which announced a huge share buyback prime property investments means (€90m in this year alone, at financing program and the imminent departure of they are precluded from participating in costs of about 2%). its star CEO Rolf Elgeti, after five years many of the more opportunistic deals Not surprising that Lone Star sees at the top of the company. that TLG can zone in on. the benefits of lightening up a little “TAG’s transformation into a stable, TLG also issues no bonds, as it has right now, with a good hand and a efficient housing company has been ‘head space’ with its banks to grow. stock market backdrop only slightly completed. This implies that the task The company now has an average cost dented by the less-than-stellar debuts profile for management has changed,” of finance of 2.99% on its debt, with of the two internet IPOs. the Hamburg-based firm said. Elgeti 6

will leave his post early, on brought into congruence with due to the poor condition of many of the 31 October, but is prepared the cost of equity.” It is thus Chemnitz properties, which will require to take a seat on the super- planning to sell where prices big capex over the next few years. The visory board. His duties will are significantly higher than price of this and an earlier deal in Des- be taken over by colleagues book value, it said. sau reflect a price multiple of about 10.7 Claudia Hoyer, Martin Thiel “For several months now, times annual rent; TAG often sells when it and Harboe Vaagt. we have observed that as the can get a price of 17-18 times that figure. “After more than five very cycle progresses, sales op- busy years, TAG has firmly portunities appear ever more established itself on the property and attractive,” said Elgeti. “Capital disci- Germany/CMBS capital markets,” said Elgeti himself in pline is an important factor for succeed- CR sells further assets from a release. “A very strong management ing in the real estate business. We began Treveria, MSREF, opens bid- team has evolved, one that I am person- buying much earlier in this cycle than ding for D12 ally also very proud of. My three fellow many of our competitors, in the process board members are perfectly attuned to creating significant value for our share- The London and Berlin-headquartered each other and do a brilliant job.” holders.” CR Investment Management kicked off TAG is also starting a share buyback Despite a good acquisition pipeline, the month by selling three further proper- program for up to 10% of share capital, TAG said it is becoming increasingly dif- ties for the portfolio backing the Sunrise given the firm’s high cash position – at ficult to reallocate the capital released to II/Treveria II loan, part of the Treveria over €250m – and developments on new and acquisitions whose pricing ap- D Silo, whose history we have reported housing markets which will lead to more pears justified. “Simply put, our capital on in REFIRE several times over the past sales. It will buy back over 13m shares at base is too strong at the moment, and eighteen months. a price range of €8.35-€9.35 in a form of with a dividend yield that is significant- CR was appointed as asset manager modified Dutch auction. The acceptance ly above our marginal costs of interest, for Treveria D Silo in February 2013. At period has already started and ends on a share buyback seems the obvious the time, the portfolio consisted of 48 re- 14 October, with private bank Kempen & course of action,” added Elgeti. “It is in tail assets, including department stores, Co. appointed as settlement agent and line with our company’s DNA to recog- shopping centres, car dealerships and Close Brothers Bank as information nise at an early stage that investment food discounters, across 250,000 sqm agents. risks have increased significantly in this and 43 German cities. The portfolio to- After the completion, the firm plans phase of the cycle - and then to act on day consists of 43 properties with a mar- an extraordinary general meeting to this recognition.” ket value of approximately €150m. propose additional share repurchases TAG’s nearly 70,000 residential units Similar to the Treveria C-Silo, for and Elgeti’s election to the supervisory are often located on the peripheries of which CR was awarded the asset man- board. At least one new shareholder has Germany’s larger cities, and the portfolio agement mandate in early 2010, and appeared on the shareholder roster with is not considered the easiest to manage which was originally financed by loans of the obligatory declaration of a holding of given the geographical dispersity of the €550m, the Treveria D-Silo was original- more than 3%. The Los Angeles-based holdings. The share buyback plan comes ly financed by loans from Citigroup and Capital Research and Management after several months in which Elgeti was Deutsche Bank. Company now has 3.03%, or 3.98m vot- reported to have been in talks with oth- The loans were subsequently securi- ing rights. It is also expected that long- er large residential investors to sell the tised in both the C and D silos, and in the time shareholder Bert Flossbach from company to them, but obviously with no case of the D-Silo, the loans sit within the Flossbach von Storch, which owns success. EMC 6 and DECO 2006 E4X securitisa- 12% of TAG, will lighten up his position. TAG is still an active buyer of residen- tions. In both the Treveria C- and D-Silos, Over the past 12 months, TAG has tial portfolios as well, and recently paid Situs Asset Management has the spe- bought over 7,000 residential units, but €37.8m in an asset deal for 1,770 units in cial servicing mandate. has also been a seller at a significant the eastern university cities of Freiberg, The three properties sold are all retail margin above book value. The firm be- Chemnitz and Dresden. assets, and are located across Germany lieves the market has reached a level The portfolio has 85,000 sqm of letta- in Duderstadt, Kempten and Ranstadt. in some sectors and regions, “where ble space and generates €3.7m in annu- The Duderstadt property comprises of holding certain assets can no longer be al rent, with about 13% vacancy, largely four freehold retail units with an occu- 7 www.refire-online.com

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pancy rate of 95%. of behalf of the The increase is the first recorded by the The Kempten property listed Summit University of Regensburg’s (with which is a department store Group, working IREBS is affiliated) real estate research with four storeys and a closely with spe- department since 2008. “This study is basement with a 100% cial loan servicer important for overall understanding of occupancy rate. The Hatfield Philips the market for commercial property fi- Ranstadt building, currently a local super- International. nancing”, said Jan Bettink, chairman of market, is designed as a mixed-use prop- The portfolio is made up of 12 inner city Berlin Hyp and the president of the vdp. erty suitable for redevelopment. office properties located across Germany. At presentations in Berlin and Frank- Alex Lackner of CR Investment Man- Two of the assets are in Big 7 cities, with furt, IREBS said the necessary ‘clean- agement commented, “We are current- nine in smaller cities but above 100,000 ups’ in the wake of the crisis have now ly in negotiations with a broad range of inhabitants. The portfolio totals more than been completed “to a large extent”, with both local and institutional investors for 150,000 sqm of lettable space, with nine the market once again growing. a further 22 properties from the portfolio, of the properties having more than 10,000 The survey found that most insti- which are in the due diligence process sqm. All the assets are currently leased tutions are optimistic and expect loan and we are very optimistic that there will to Deutsche Telekom AG and generate books to grow with new business. IREBS be further progress in Q3 and Q4. CR has an annual rent of €15.5m. According to said 72% of the 32 surveyed financial extensive experience in the asset type, CR, the specific properties in Düsseldorf, institutions expect loan books to grow – quality and sector and we continue to ap- Mannheim and Potsdam are targeted for with 32% expecting an increase of more ply that expertise to maximising value in conversion and redevelopment. than 5%. A weighted average loan book the work-out through to eventual sale of According to Hatfield Philips’ CEO growth of 2.6% was predicted for this the remaining properties in the portfolio.” Blair Lewis, “This is a value-added port- year and 3% for the next two years. A further announcement in the mid- folio that is anchored by a very strong The survey found an increased will- dle of the month from the company said tenant in Deutsche Telekom AG. What ingness to lend in prime locations in that CR had also arranged the sale of ten makes this collection of assets even more secondary cities, as well as in secondary properties out of its Sanchez portfolio interesting is the significant embedded locations in prime cities. Lack of appe- between June and September, for a price asset management opportunities. tite for lending in secondary cities has, of €55m. The properties, located across CR Investment are looking for indic- IREBS said, decreased significantly, as a Germany, total 65,000 sqm of lettable ative bids from potential buyers for the result of rising competitive pressure and space. whole or parts of the portfolio by 22nd decreased financing potential in prime CR said they were sold to various buy- October, with a view to closing the deal cities. ers ranging from local developers to large by year-end. “Properties in Germany, even in international investors” for total proceeds less-favourable locations in secondary of about €55mn. The original 107 proper- cities, are able to obtain a broad range of ties in the Sanchez portfolio were financed Germany/Financing finance facilities,” IREBS said. through loans totaling about €1.1bn, in- German property lending Respondents expect margins to de- cluding the €472mn securitized ‘Mozart’ growing again, but at lower crease this year and next year, by about loan, with the original owner being a Mor- margins 25 basis points to about 114 bps, with gan Stanley Real Estate Funds vehicle. loan-to-value ratios rising. The mar- In a widely-publicised move at the time, After several years of being on the slide, gins will shrink further towards 100bps Morgan Stanley effectively ‘handed back German commercial real estate loan by 2016, the survey predicts. “This is the keys’ in June 2011, at which point CR books are now increasing again, accord- no reason for concern”, says co-author was appointed by the lenders as Asset ing to research by the country’s Inter- Markus Hesse, pointing to the fact that Manager and Transaction Adviser. national Real Estate Business School lenders increased margins gradually over CR said it has now managed to reduce (IREBS) and Real Capital Analytics, the last four years, while keeping loan-to- the portfolio to less than 20 properties, and supported by the vdp (Association value ratios stable and, in some cases, and had achieved sales prices averaging of German Pfandbrief Banks). reducing them. 10% above market value. CR Investment The German Debt Project, backed by Professor Dr. Tobias Just, the Chair also said last week that it has started the the German Pfandbrief banks, found of Real Estate at the IREBS Institute and process of selling the DT 12 Portfolio loan books rose in size by 0.8% last year. scientific leader of the survey, warned of

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

Connecting Global Competence

Welcome to the global real estate network

Success is the sum of the right contacts – and EXPO REAL is the place to meet them. This prominent international trade fair spans six halls and is attended by no less than 36,000 real estate professionals from across the sector. It is home to top-level discussions between leading real estate experts and is the place where the foundations are laid for future real estate projects. Join us and tap into this potential for your business.

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Where all threads come together Find out more – and get connected: 17th International Trade Fair for Property and Investment blog.exporeal.net October 6–8, 2014 | Messe München | Germany www.exporeal.net 10

...... GUEST COLUMN

Chinese capital and German real estate – why we should care The implications for German real estate market participants in this is that there is a fairly new and growing source of capital Angela Haupt, MRAG Projekt GmbH & Co. KG and revenues becoming available. In addition, since not only economic fundamentals but also capital flows drive valuations, With the pace of Chinese outbound investment accelerating, the investment preferences of Chinese investors will become an there is now a clear opportunity for German real estate profes- increasingly relevant factor in performance. sionals and companies to gain – even if initially modest - market share of this growing source of international capital, along with In 2014, more than 60% of global institutional property funds the revenues generated from the facilitation and management of were allocated to office real estate, followed by retail, industrial invested capital in German real estate assets. As it stands, both and mixed-use. Common features characterizing transactions funds and mandates are still largely bypassing the local German across all key markets include the acknowledged preference real estate industry. for investing in stable and liquid markets, in es- tablished locations, and into income-producing On October 6th 2014, new regulations come into properties. Germany scores highly on all these effect in China which open the gates for overseas counts. investments of up to USD $1 billion per transaction made by Chinese companies. The new provisions re- The US recovery story vis-a-vis the Euro cri- place, for the most part, a complex and lengthy pro- sis has not gone unnoticed, either. Preferences cess of state-sanctioned approval with much simpler may change sooner rather than later, however, registration requirements, as per the Measures for because yield compression is in a developed Foreign Investment Management issued by China´s stage, familiarity with a broader range of markets all-powerful Ministry of Commerce (in short “Mea- is increasing, and – last, but not least - there is a sures No. 3”, by MOFCOM). potential divergence between US and Eurozone monetary policy. In July 2014 a further directive and its implementing rules had already eased outbound investment undertaken by individuals, However, the common denominator straddling all these differ- “Circular 37” by the State Administration of Foreign Exchange ences, and the one crucial factor underpinning the Chinese out- (SAFE). Both, Measures No. 3 and Circular 37, removed regula- bound strategy, is the need for DIVERSIFICATION. tory uncertainty preventing investment, and have greatly simpli- fied procedures. Chinese investors are now in a position to close A good example on the institutional side is insurance group deals faster, and to compete for a broader set of targets. Ping An, which follows a familiar investment principle. Using its domestic bond yields as a risk-free benchmark, the insurance These changes are the most recent - if not the biggest - steps group diversifies into income-producing alternatives with differ- within the general “Going Abroad” policy which the Chinese ing yield premiums, for example with its recent London invest- government initiated in 1999. Within that framework, important ment in the Lloyds of London building generating an initial 6.1%. milestones for institutional investment were a) the 2010 inclu- sion of real estate as eligible foreign alternative investment and, One approach some developers are taking to address one as- b), the 2012 increase of the maximum permissible allocation to pect of risk is to target and cater for individual Chinese going real estate from 10% to 15%. The overall maximum for foreign abroad. Individual Chinese investors often seek investments that investments remains at 15% for the moment. provide residency privileges, foreign passports or other bene- fits of property ownership where they have business interests or Official estimates expect Chinese companies to invest over where their children are being educated. Incidentally, Germany USD $500 billion internationally over the next five years. Germa- is China´s biggest European trade partner, and the largest group ny, ranked by nominal GDP, should be the fourth-largest global of foreign students in Germany now is the Chinese. recipient of investment capital. Applying the country weight of a benchmark like the MSCI World GDP Weighted Index, a neutral Other Chinese developers and their capital providers are seek- stance on Germany would accordingly generate a market share ing alternative approaches for expansion, as they firmly expect of around 8% of all Chinese international real estate allocations. domestic policies to negatively impact their industry in China. There are, of course, plenty of persuasive arguments as to why They are looking for more predictable returns, and are prepared Germany should actually exceed this 8% share. to lower their return expectations in exchange. Returns of 15% 11 www.refire-online.com

IRR may seem utopian, but must still be viewed in the light of real estate at 1% of AUM, including their allocation to domestic up-till-recent expectations of 30%-50% returns in China. Those real estate. days, too, are over. Both Chinese developers and insurers are branching out into From a German perspective then, core properties and even proj- the fast-growing asset and investment management industry as ect developments in prime locations may not be competitive for they pool funds from smaller players and generate economies of the Chinese in respect of pure return considerations. Therefore scale. Several onshore Mainland Chinese asset managers now it is also vital to focus on communicating risk management as- have offshore Hong Kong subsidiaries. With their access to the pects, as well as the myriad opportunities available in Germany’s mainland, Hong Kong asset managers in general are expected secondary locations. Current inward investment volumes are not to outperform their foreign competitors in fundraising for out- one-off spikes, but a rapidly-growing base level. Reportedly, for bound international investments. 1H14 Chinese outbound investment (OBI) in real estate reached 16 billion USD globally, up 40% over the same period a year A 2012 plan, introduced by the China Insurance Regulatory earlier. Commission (CIRC), included measures to allow Chinese insur- ers to outsource funds to external asset managers and securi- Not only are the outbound investment (OBI) allocations increas- ties brokerages and, in a manner similar to the changes to the ing, but so are both assets under management (AUM) and actual German KAGG a few years back, this can become a catalyst for investment expenditure into real estate. The Chinese economy reconfigurations in the value chain. In Germany, the effect was to is projected to keep growing far faster than the Western econo- open the field for competition and globalization. mies and is projected to reach about 20% of global GDP among the top 30 global economies in 2050. That will entail significant Ultimately, these new changes provide German market partici- wealth creation. pants with an opportunity to capture market share in the increas- ing funds of Chinese capital for German real estate assets, be it The Chinese mutual fund industry, pooling retail investors’ mon- as seller, advisor, developer, co-investor, financier, manager or as ey, is expected to reach USD $1 trn (1,000 billion) AUM by 2015. a local partner in other ways. Keeping up with overall economic growth rates would mean around 8% growth p.a. However, a disproportionate amount It is important to note that, for the German real estate industry, of the wealth created is going into real estate, not mutual funds. just earning an allocation to German real estate does not nec- essarily mean that German firms will be involved in the man- With the Chinese government now actively promoting more agement of assets or the structuring of the relevant investment securities investment to the public, one can only speculate as vehicles. How much investment is routed via New York, London to how this will boost the listed real estate sector and the role or Luxembourg, for example? played by real estate fund managers. Just 10% of AUM to real estate as an asset class at an 8% country allocation would Last but not least, diversification is not just a one-way street. It sweep an additional USD $8 billion to Germany from retail funds is good to have different sources of capital. The performance and, assuming 5% growth of AUM, fresh money of more than of assets and asset managers can benefit from positive capital $400 million p.a. thereafter. inflows. Unlike fundamentals, however, that any one individual can hardly bring too much influence upon, there ARE many ways As to wealthy Asian individual investors, there is a traditional- in which funds can be attracted to invest in a specific market. ly high affinity to real estate, with allocations by family offices Germany has many of these attractions. and ultra-high net worth individuals (UHNWI) of 30% or more not unusual. The assets held by the top 125 Chinese UHNWI are In consequence, it is up to the German real estate industry to estimated at USD $360 billion. communicate with and meet proactively with these decision makers and their teams. Go east, Germans, then. Meanwhile, at Chinese institutions, in particular pension funds, assets under management have been growing at twice the rate Angela Haupt is a Managing Partner at MRAG Projekt GmbH & Co KG in Berlin, Germany, of GDP growth, albeit from a small base. The mainland China which she co-founded in 2003. Ms. Haupt has about 20 years of international experience overall pension system encompasses a total AUM of more than in direct and indirect real estate, investment and risk management, manager selection, 9tr RMB. Of that, insurers had about 5/9 at the end of 2012. They capital raising, fund and company formation and from a decade working at leading global are - and will likely remain - the most active market participants asset managers. She specializes in linking real estate and capital markets for German op- in diversifying their assets across asset classes and global loca- erators and international investors. MRAG is a real estate investment and capital markets tions. Having said that, Chinese institutions are still underweight advisory firm, focused on inbound investment to Europe from the US and Asia. 12

...from page 8

the changes ahead for bank providers. Grundbesitz Fokus Deutschland. The estate expertise.” Shares in the fund will “For real estate financing institutions, it is launch date is 1st October. be offered nationwide in all Deutsche important not to rely only on the positive This is the first fund launched by Bank bank branches from 1st October. German economic outlook and, above Germany’s largest bank under the new The new legislation affecting Germa- all, on historically low interest rates,” he KAGB capital investment code, and the ny’ open-ended funds kicked in in July said. “To escape the rising competitive first new open-ended fund from the bank last year, and among a number of chang- pressure, it is now necessary to occu- in 14 years. The fund, aimed largely at es designed to enhance investor secu- py profitable niches that private investors interested in fixed rity, stipulates a minimum investment offer a higher margin po- asset investments with long-term period of 24 months and a redemption tential.” investment horizons, will invest in notice period of 12 months for new in- The IREBS study con- commercial and residential prop- vestors. cluded that the two most erty throughout Germany. DeAWM Only a small number of the older Ger- important challenges said it is looking for achieving a man open-end real estate funds are left for German real estate balanced mix of locations, build- in the market as many closed during the lenders are the sharp ings, tenant structures and lease run on liquidity during the financial crisis, rise in competition and durations, with an emphasis on only to be hit again – after a few had suc- increased regulatory re- growth regions including mid- ceeded in reopening briefly – by market quirements. sized cities in the mix. uncertainty arising from publication of According to Ulrich Steinmetz, head draft legislation in May 2010. of DeAWM’s open-ended funds division, Altogether 15 funds were forced into Germany/Open-ended Funds commented: “This is the right time to in- liquidation, while a further three are fro- Deutsche Bank launches new vest in fixed assets and to launch a new zen and could liquidate this year. De- €700m open-ended fund open-ended real estate fund. Alongside AWM employs 140 people in its real our existing global and European-fo- estate business, managing about 500 Deutsche Bank subsidiary Deutsche cused funds, the Grundbesitz Fokus properties in Germany valued at over Asset & Wealth Management (formerly Deutschland offers our investors a third €6bn. Internationally, it holds €34bn in its RREEF) is launching a new €700m Ger- product clearly differentiated, focused Grundbesitz Europa fund as well as in man129_RZ_ open-ended Refire_125x87_REAG real estate 23.07.14fund, the 15:47 andSeite underpinned1 by our extensive real several closed-end funds for private in- vestors and special purpose vehicles for institutional clients. Professional Excellence since 1896 Germany/Residential

REAG is an independent consultancy specialising in real estate. Nearly half of German res- Our professional team in Europe provides services to national and idential investors earn no international clients primarily in the following fields: real return

• Appraisal (ImmoWertV, BelWertV, Red Book, IFRS) A recent study produced by the pres- • Investment Advisory (Document DD/management, distressed tigious DIW Deutsche Institut für portfolio consultancy) Wirtschaftsförderung in Berlin received • Technical Services (Technical DD, Project Monitoring) wide coverage in the German media re- • Environmental Due Diligence cently when it suggested that about half • Green Building (BREEAM, LEED) Messe Munich of all residential landlords in Germany Represented in Berlin, Frankfurt, Hamburg, Bremen, 6. - 8. October 2014 break even at best and frequently make Cologne and Munich, please call: actual losses, when inflation is taken REAG GmbH Real Estate Advisory Group Germany Please visit us: Bockenheimer Landstraße 22, 60323 Frankfurt/Main Hall A1, Booth 231 into account, on their residential invest- Tel. +49(0)6924752670 ments. [email protected] www.reag-aa.com The highly insightful DIW study con- Regulated cludes that 25% of residential invest- by RICS ments in Germany produce a net yield 13 www.refire-online.com

KRIEGER R EAL ESTATE M ANAGEMENT

AUDITOR· TAX A DVISOR· ATTORNEY of 0%. In 8.5% of case the gross yield is actually negative. FRANKFURT AM MAIN · LAMPERTHEIM · BERLIN Put into figures, of the approximately seven million house and apartment owners who have invested for return, nearly three million earn nothing. About 21% earn between zero and 2%, before inflation. Only the 18% or so who earn a yield of 5% and upwards can be said to be making any real return. Wertgrund Immobilien AG, which commissioned the study from the DIW, says that landlords frequently com- pletely underestimate the ongoing costs associated with maintenance, costs associated with tenant moves, and involuntary vacancy. Wertgrund chairman Thomas Mey- er commented, “Assuming an annual inflation rate of 2%, then the actual real yields on more than 50% of residential real estate investments come in below that, with the bulk of those being apartment units bought to let. Over the last ten years German investors in residen- tial property have seen yields of 2%-3% on average, not high compared to other forms of investment. “Compared to yields which in the past were achievable on fairly safe investment, yields on private residential property have been relatively low, in particular given the risk profile, cluster risk and high maintenance costs of property. The DIW research- er find that factors such as age, education, federal state, sex or type of household have much less to do with rent- al income and actual returns than the level of one’s per- sonal income and the type of property invested in. Those with higher incomes who invest exclusively in multi-family houses and apartment buildings instead of in single-family homes or individual apartments get much better returns. The DIW researchers availed for their study of their own proprietary “Socio-economic panels” from the years 2002, 2007 and 2012, which enabled them to assess a total real estate volume of €4.83 trillion for 2012. Of this, €3.75 trillion was owner-occupied, with €1.08bn attributed to buy-to-let and other forms of investment. The average property value assessed was €155,000 while the richest 10% of property owners had properties averagely valued at €264,000.

Europe/Cross-border Investments German capital remains ‘Weltmeister’ in global real estate investment

It’s not just in football that Germany is Weltmeister - Ger- man investors have pumped $151 billion into international real estate over the period 2004-H1 2014, making them the most active and important source of cross-border capital, according to analysis by property advisor JLL. German groups have continued to invest outside of its 14

domestic market during the last ten years investors will maintain their international amount of capital allocated to real estate even when other investors have reigned investment focus.” continues to grow at a global level. We ex- in cross-border activity. This has put them Domestically, German investors also pect the cross-border flow of investment ahead of capital outflow from North Amer- dominate their local market. Since 2004, targeting Germany to increase, as tradi- ica ($133bn) and UK ($100bn) sources. German capital has accounted on av- tional investor groups from Europe and Despite a widespread German invest- erage 52% of real estate investment in North American and newer entrants from ment policy targeting over 40 countries, Germany. However, JLL analysis of under Asia and the Middle East start to bid more 82% of German outbound investment has bidder activity suggests that international aggressively and secure assets which been allocated to mature markets found demand is stronger than purchaser fig- previously might have ended up having in Western Europe and North America. ures indicated. According to data collect- domestic owners.” The majority (80%) of German capital ed from €1.3 billion of office transactions flows have targeted core office product, above €100 million in the last 18 months, with retail investment accounting for a fur- 65% of purchasers were domestic. 72% Germany/Non-Performing Loans ther 13%. of the under-bidders were cross-border German distressed real es- Matt Richards, Head of Internation- investors from USA, Korea, UK, China, tate debt on the rise - Study al Capital Group – Europe at JLL said: Czech Republic, Canada, France and “Despite being challenged by Norwegian, other countries. These underbids totalled The amount of distressed debt in Ger- Chinese and Canadian investors, with almost €7 billion. many’s real estate sector is set to rise their established presence in many global Marcus Lütgering, Head of Office modestly, largely as a result of post- property markets, we anticipate German Investment, Germany at JLL said: “The poned transactions in the recent past, 15 www.refire-online.com

concludes the annual “Survey on Real The survey also focused on assessing survey’s findings on new business are Estate Financing and Distressed Real the financing sentiment for commercial equally interesting, while the market for Estate Debt in Germany”, carried out by real estate from banks’ perspectives, real estate loans is changing rapidly at private equity group Corestate Capi- and found that the prevailing need for the moment. “Despite margin pressure, tal and the Real Estate Management yield has caused loan-to-value gearing uncertainties in regard to the level of in- Institute (REMI) of the EBS European ratios to rise even while lenders are in- terest rates, Germany’s economic situ- Buisness School in Wiesbaden. creas¬ingly enforcing principal repay- ation, as well as the ongo¬ing crises in The survey also reveals that the need ments. But loan maturities are get¬ting the Middle East and Ukraine, banks are for yield has caused gearing ratios or shorter. raising LTV thresholds and are expecting LTVs to rise, at the same time that NPL “In sync with the increase in pro-ra- to see a constant or indeed increased discounts are also rising while the life- ta financed pro¬ject developments, real volume of new business,” he said. times of loans are getting shorter. estate financing arrangements are gen- This year survey respondents includ- According to Thomas Landschreiber, erally characterised by shortened ma- ed 31 senior banking executives, whose chief investment officer at Corestate Cap- turities and elevated risk levels,” said institutions account for roughly 97% of ital at a recent press conference in Frank- the survey, which is a continuation of all assets held by German commercial furt to present the findings, “In 2012, work that Corestate Research and EBS real estate finance providers. the decision-makers we polled were ex- REMI has been doing since foundation pecting a major clean-up and sell-off of in November 2011. “We are particularly non-performing loans. Last year, the ex- pleased to see that now, in our third re- Germany/Residential perts no longer diagnosed a dire need to search year, we are in a position to show Eastern German residential sell, true to the maxim ‘extend and pre- the extent to which the market for com- still risky, Jena remains the tend.’ Now the wind has shifted again, mercial real estate financing contin¬ues exception and we expect to see distressed trans- to shift and has still not settled down,” actions rise slightly. But these are prob- said Landschreiber. Residential property owners in large ably not new distressed loans, but rather Nico Rottke, founder and profes- parts of eastern Germany will have to transactions postponed in the past.” sor of the EBS REMI, said this year’s reconcile themselves to a long-term fall

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Development of German housing markets

Catella Research: The high level of migration to towns and cities shows its impact on the 49 housing markets analysed. Rising rents are attractive for investors and the construction industry, yet challenging for cities, municipalities and politicians. Additional capacity and urban reconstruction are becoming a socio-political task in Germany’s age of urbanisation.

Kiel 26 7,516.55 ,.0 +2.384+2,384 5 -6.77,0 + Rostock 7.15 SCHLESWIG-HOLSTEINSCHLESWIG-HOLSTEIN +1,286 3 7.2 6 Lübeck ,.3 4 8 7,466.75 - 57 +1.835+1,835 3,. 17,96.6 + MECKLENBURG-WESTERNMECKLENBURG-VORPOMMERN POMERANIA Schwerin HAMBURG 6.10 Hamburg +237 8.6 11.0010,99 +15.011+15,011 22.422,5 8 7 3 - 2 25 Oldenburg 1,. BREMEN 3 + ,.13 7,677.25 Bremen 1 +1.125+1,125 + 18,011.4 7,756.90 BRANDENBURG +3.514+3,514 4 21,37.7 LOWERNIEDERSACHSEN SAXONY ,.13 12 + 0 2 BERLIN 8,137.95 +41.324+41,324 ,.3 Berlin 23,620.7 8 -

HannoverHanover SAXONY-ANHALTSACHSEN-ANHALT Potsdam Osnabrück 7,206.65 6,837.95 6,446.75 +8.232+8,232 Braunschweig +1.488+1,488 +1.323+1,323 29,519.2 25.27,6 15,420.8 7,178.00 +2.467+2,467 Magdeburg 7,897.40 6,095.80 30,445.5 +2.954+2,954 +1.329+1,329 5,995.05 10,23.6 6,71.9 +1.470+1,470 5.35 23,84.3 +433 6,486.35 Münster Bielefeld 9.9 +3.212+3,212 13,311.2 Cottbus

5,485.50 5,896.60 9 +786 +1.086+1,086 7 -6,0-6.0 14.82,4 7 Oberhausen ,. 6,176.25 5 +1.272+1,272 3,24.5 Bochum Dortmund 1 Halle/Saale Duisburg - 6,256.65 5.85 Essen +2.338+2,338 +1,611 Leipzig 6,216.20 Krefeld 12,018.8 NORTHNORDRHEIN- RHINE- 3.9 +985 4 5,65.6 WESTFALEN Kassel 1 6,745.70 6,596.80 Mönchen- Wuppertal 6,246.00 WESTPHALIA 5 +10.791+10,791 +6.068+6,068 . 22,1 17,721.8 Gladbachgladbach +1.559+1,559 6,296.30 6 2.9 5,92.2 +1.231+1,231 - 6.90 6,895.85 33,834.3 +286 50 Dresden +973 9,939.10 24.3 ,.1 14,8-2.5 Düsseldorf +4.007+4,007 3 24,113.8 THURINGIATHÜRINGEN Weimar + Erfurt CologneKöln Jena 6.75 6,58 SAXONYSACHSEN 8,599.30 +1,680 +1.680 8.60 +9.062+9,062 23.4 20,5 +420 Aachen 10,019.0 30.3 6,607.40 +2.262+2,262 Bonn 1 7,120.1 7 9,608.20 ,.2 +2.026+2,026 3 23,14.9 - Development of housing rent in HESSENHESSE selected cities (2008–2014) 1) 2 Average rent 2014 in €/m 7.55 9,569.80 2 +1.405+1,405 2 10,813.6 Rent increase 16 ,.9 2 Frankfurt/M. - Wiesbaden since 2008 in % (total) 10,6911.45 +8.648+8,648 RHEINLAND-PFALZRHINELAND- Mainz 22,535.5 8.90 2) +438 Total population migration per city PALATINATE 9,129.00 37.6 +1.672+1,672 Darmstadt Increase/decrease 10,99.6 Würzburg 9.45 +1,913 (balance) +1,835 -1,835 14.7 0 8,168.85 20 +5.291+5,291 ,12 18,828.8 2.1 2- Kaiserslautern MannheimMannheim Population migration between the - NurembergNürnberg 3) 6.25 8,698.20 SAARLAND +418 +3.460+3,460 federal states SAARLAND 24.3 27,620.1 6,706.70 0 0 +1.107+1,107 Increase/decrease 15 5 Saarbrücken 34,034.0 3, ,1 6 + 3 (balance) - ,.48 15 Karlsruhe + 4) 8,68 Expected impact of rent brake +4.258 Karlsruhe37,6 BAVARIABAYERN 8.45 Stuttgart Heavily affected +4,258 34.1 11,229.90 +8.194+8,194 Less affected 17,23.6 7,377.85 Unaffected +3.697+3,697 24,932.7 Augsburg 0 88 1,. + 1) Average housing rents in 2014 based on MunichMünchen three bedrooms, approx. 70 m²; average BADEN-WÜRTTEMBERGBADEN-WÜRTEMBERG location in portfolio 13,4012.60 +18.725+18,725 2) Including migration from abroad and other Freiburg 24,216.6 federal states in 2012 8,529.50 +3.263+3,263 3) 20.88,5 Only migration from other federal states in 2012 4) Difference between rent offered in the first half of 2014 and the average rent for a Status: September 2014 60 m² flat of a medium to good standard. – Heavily affected: deviation > 20% Contact: [email protected] – Less affected: deviation 10–20% – Unaffected: deviation < 10% 17 www.refire-online.com

Germany/Research What is really influencing the future devel- existing housing segment. Not one of the 49 locations was opment of Germany’s housing market? subject to a negative inflow balance. In other words: the num- ber of people coming is greater than the number leaving. This Dr. Thomas Beyerle and his team at Catella Research pro- major shift is part of the urbanisation wave Germany has been duced a very interesting study recently on the key factors af- experiencing since 2010 and can be felt in each of the local fecting the likely future direction of Germany’s housing market. housing markets. This means that these movements cannot The Catella analysis covers market movements in 49 German be written off as a sign of the market overheating. They are towns and cities, focusing on the existing housing segment merely a ‘structural jump’ in rental levels that is set to continue. (rather than the more glamorous – but less representative – premium market segment of new-build family housing and At the same time, says Dr. Beyerle, this diagnosis requires a high-end apartment complexes. (See chart on Page 14). solution to the increasingly pressing discussion surrounding urban redevelopment. Only part of the demand for affordable Of particular importance is the development of housing rents housing will be met with the concept of densification and in this existing sector, migration and immigration patterns, and state intervention in the rental market (rent brake, or Miet- the anticipated effects of external intervention such as the preisbremse). As there continues to be no sign of a structural soon-to-come-into-force Mietpreisbremse, or rental caps on change to the influx to inner cities in the foreseeable future housing in urban quarters with heavy demand. (including immigration to Germany), it must be expected that the situation will intensify. Among some of the findings which caught our eye in the Catella research study: Dr. Beyerle views the current status quo (rising prices, with ‘bubble’ fears) as potentially leading to a number of conflict Overall rents for existing housing at almost all of the 49 lo- resolution scenarios, among them: cations have risen since January 2008, although the rate of increase began to slow markedly for the first time in January • The uncertain environment causes rents to increase 2014 even more sharply, demanding even more fundamental regu- lation than the imposition of rental caps Magdeburg currently has the lowest average rent in Germa- ny at € 5.05/sqm per month, while the highest average rent • The imposition of a time limit on such market inter- can be found in Munich at € 12.60/sqm per month, as in vention of three to five years previous years. • The need to alleviate concerns, with a clearer defini- However, residential rental prices have not risen everywhere tion of ‘strained markets’ and ‘affected micro locations’ being in recent years: Kiel in Schleswigh-Holstein has seen a de- required. cline in rent of -6.7% since 2008. In contrast, the highest percentage increase has been recorded in Braunschweig, • Pre-emptive effects or attempts to “preserve rent at with an increase of 45.5% in the same period a high level” can be expected in the coming months, reversing the political approach Contrary to popular opinion, this trend has not just been trig- gered by capital flows or capital investors rediscovering prop- • The market environment for investors is more favour- erty investment as a result of current rates of low interest. This able than ever due to low interest rates, which will lead to a development can primarily be detected in the “new-build/first continuation of construction work in the coming years, but occupancy” and the “renovation/first-time let” market segment. only by resolving emerging issues, such as: These can be found in trendy residential areas, known as hot spots, such as in Frankfurt’s Nordend, Europaviertel or in Ber- Ongoing efforts to tackle the root causes of price increases, lin-Mitte. Catella Research also forecasts partial declines in sub- closer linkage of available municipal land with developer sequent lettings in this premium segment for the coming years. requirements, the emergence of ‘slimmed-down’ hous- ing types (e.g. with no cellar), more fine-tuned analysis of The Catella researchers believe that these overall increases domestic immigration flows, reform of land tax regulation, are structural, i.e. they are unlikely to reverse in the near future, and much closer collaboration between legislators and the due to the influx of people into these towns and cities in the legitimate concerns of the real estate sector. 18

...from page 15

in the value of their properties, says a new study carried out regions in eastern Germany, with more solid prospects than the for Germany’s Postbank by research group Prognos Institute. bigger cities of Dresden and Berlin. In particular, property in rural areas is most at risk of seeing Neighbouring cities Weimar and the state capital Erfurt are long-term erosion in value, although there are still some regional also in the top-10 for property price appreciation, although Erfurt exceptions, says the study. is still considered affordable, with the average mortgage burden The cities of Jena, Potsdam and Dresden are well-placed to well under the recommended maximum of 40% of net household buck the trend, while Berlin and its hinterland - as well as Ros- monthly income. tock, Erfurt and Leipzig - have about a 50-50 chance of holding The study finds that in 70 of 77 eastern German municipalities their property values longer term. households with below-average monthly income can still finance The comprehensive study analysed factors such as vacancy a typical 70 sqm apartment. Households with an average income rates, demographic forecasts, current living conditions for the can afford a 110 sqm apartment in three out of four municipalities over-60 year olds, and labour density. in the region. Again, in most categories, Jena proves the excep- Among the study’s findings: In the state of Thüringen, normal tion, with housing being noticeably more expensive – albeit with housing is almost universally affordable for most average earn- still higher appreciation potential. ers. The exception is the city of Jena, home to Zeiss Optik and The study lists the following top-10 regions in eastern Germa- Jenoptik and several institutes of higher learning, as well as a ny for price rise potential: number of thriving industries. The city ranks among the top-10

Guest Column: Dr. Gabriele Lüft, Managing Director of VALTEQ Gesellschaft mbH

Digitalisation of due diligence processes

Some may think that working as a tools or process management are technical consultant for real estate concerned. The more transactions transactions is a little dry. And, at we handle via such data rooms, the one time, it really was. And not just more exact and tailored the data dry, but dusty too. Several times, preparation will become. I’ve found myself in musty archives, www.valteq.de grappling with dust-covered files. This greater transparency of Back then, one of my most helpful information does however have consulting aids was soap to wash its price. The fact that the system you must have seen the information my hands afterwards. At the same itself now proves who opened in the attached report. There are so time, I had to jostle with accountants, what document and when, gives many other examples to illustrate the lawyers and other consultants for the rise to an increased liability risk for same. same files – which nearly always led consultants. For example: I have to time problems. The emergence of experienced cases in which survey This increased liability risk compels digital data rooms brought an end to reports were attached to rental consultants to work in an exacting, battles over files and the dust now contracts. As such, these reports accurate and sometimes very stays in the basement. Only the soap are deemed to have been present imaginative way. This is what we at industry has suffered by a drop in in the data room – just not in the VALTEQ do and our satisfied clients sales. place they were meant to be. Rental are the proof. contracts are looked at briefly to Digital data rooms simplify and filter out specific details, such as, e.g. I look forward to finding out at the alleviate the due diligence process the term of contract; the attachment, EXPO what moves there have been enormously and, in doing so, though, remains undetected. You in digitalisation and due diligence contribute to greater transparency would never have dreamed it would processes. One thing is certain, and efficiency in transactions. Saying be there. In a digital data room, it can however, and that is that we will make this, we are still in the early stages now be proven you have opened a every effort to remain at the forefront of development as far as structure, document and, consequently, that of innovation for our customers. 19 www.refire-online.com

Top 10 regions in eastern German for price potential: Jena real estate for your success Potsdam Dresden Landkreis Potsdam-Mittelmark Weimar Founded in 1910, AENGEVELT IMMOBILIEN is Berlin one of the largest and most experienced real Erfurt Landkreis Dahme-Spreewald estate service providers in Germany. Landkreis Oberhavel Landkreis Teltow-Fläming

Germany/Listed Companies Deutsche Annington joins MDAX, adds 5,000 new units

Germany’s largest residential housing company, the listed Bochum-based Deutsche Annington, took a step closer to its long-term goal when it entered the MDAX at the end of September – the second tier of Germany’s largest listed com- panies. The MDAX consists of the 60 largest companies by stock exchange turnover and market capitalisation after the DAX-30 companies. This brings the number of real estate companies in the MDAX to six – alongside Annington are Deutsche Euroshop, Deutsche Wohnen, Gagfah, LEG Immobilien and TAG It offers comprehensive, individual customer consul- Immobilien. Property financier Aareal Bank is also there, along with construction companies Bilfinger and Hochtief. ting both nationally and internationally in the market Deutsche Annington’s current market capitalisation is about segments of of ce premises, retail, logistics, €5.5bn, with 72.75% nominally in free float. UK private equity hotel and residential. group Terra Firma still holds a big stake in the group. Annington board chairman Rolf Buch commented on the promotion of Annington from the smaller index SDAX into the The company will support and advise you on the second division. “This will raise our profile among institutional basis of its extensive real estate research across the investors, for whom the MDAX is a benchmark. The strong entire value creation chain of your properties - from development of our company since our IPO last year sends out a very clear message – we are an attractive and reliable buying properties to project initiation/management, partner for our investors. leasing and portfolio analyses right through to the Last year Annington refinanced debt of $4.46bn (dollars), exit and sales stage. partly through a loan of €2.5m (euros) arranged by US banks Morgan Stanley and JP Morgan in a complex transaction underpinned by unsecured corporate bonds issued by An- nington. Both banks are acting as strategic partners to An- AENGEVELT Immobilien GmbH & Co. KG nington, said Rolf Buch when he took over the top job at An- Kennedydamm 55 nington last year. D-40476 Düsseldorf The company has been struggling to achieve adequate returns on its 210,000 apartment units across the coun- Phone +49 211 8391-0 · [email protected] try (about 27,000 of which are managed for third parties), www.aengevelt.com many in depressed parts of western Germany where pushing through rent increases in poorer cities particularly in North 20

Rhine-Westphalia has proved difficult, CEO Buch (pictured, right) folio well and can be optimally and led to tenant protests and image said in a statement on the deal, integrated into our efficient and problems for the group. “The purchase of the new units price-conscious management Part of Buch’s strategy is to move up represents another step in our platform.” The net rent levels fulfil the quality curve on the group’s holdings. growth strategy to generate value the firm’s claim of ensuring afford- It recently acquired a portfolio of 5,000 from our existing portfolio and to able housing even in metropolitan apartment units from CitCor Residential develop new, high-quality portfo- areas, he added. The deal brings Group, a joint venture between Citigroup lios with the acquisition. The pur- Annington’s apartment holdings Property Investors and Corpus Sireo, chase meets our acquisition criteria and in Berlin to 16,200 units. with the bulk of the units (about 2,500) has a positive effect on both FFO and The Annington acquisition comes located in Berlin. The rest are located in NAV per share and maintains our BBB shortly after another major residential ac- Ludwigslust south of Schwerin, Dresden, rating from Standard & Poor’s.” quisition which we reported on in these Jena, Leipzig and Erfurt. The package Board member Klaus Freiberg high- pages recently. In July the Berlin-based also included 210 commercial units. lighted the move eastwards in the ac- Westgrund bought 13,500 apartments The price paid was thought to have quisition: “We are raising our country- from the City of Berlin-owned housing been around €310m, based on multiples wide presence as Germany’s largest group Berlinovo, paying about €32,500 of the average prevailing rents. With aver- apartment company with the acquisition per unit. The listed Westgrund is just one age monthly net rents of €5.52 per sqm., of the new apartments in metropolitan of many listed residential companies the total portfolio encompasses living and areas of the new federal states. The hungry for building up their residential usable space of more than 344,000 sqm. housing package fits our existing port- holdings, particularly in Berlin with all its 21 www.refire-online.com

associated synergies in asset and prop- Germany/Listed Companies IVG also announced this week that erty management. IVG Immobilien completes it had completely refinanced €1.5bn Investors also see further rent-raising refinancing, exits insolvency of debt with Deutsche Bank, with IVG potential in the capital city as it catches bundling various outstanding loan fa- up (from a low base) with other European A year after filing for creditor protection, cilities and individual liabilities into two capitals. Last year Berlin rents (on new Germany’s erstwhile listed heavyweight new loan agreements with the bank. leases) rose 8% - in other German cities property company IVG Immobilien AG New CEO Ralf Jung said in a state- the previous strong rises have seen a no- has exited its self-managed insolvency ment, “The company has strong cap- ticeable slowing-down. Hamburg, for ex- proceedings, one of Germany’s larg- ital resources following the successful ample, according to broker CBRE, actu- est-ever corporate collapses, and so conclusion of the refinancing, and this ally saw a slight fall of 0.6% for the year. has avoided its once-feared filing for is a solid foundation from which to play However, another evident trend is liquidation. a leading role in the market for office the move into lower-tier cities than just A Bonn court lifted restrictions on property in Germany once again.” the Big 7, as prices have become froth- the company, which has now appoint- IVG has a current property portfolio ier in the biggest metropolitan areas ed a new supervisory board and cut ties of about €3.5bn, making it still the larg- and supply of suitable assets dries up. with remaining previous management. est portfolio manager for office prop- Prospering second-tier cities such as The group’s former creditors, mainly erty in Germany. The new supervisory Dresden, Leipzig and Jena are being hedge funds and opportunity funds, be- board is chaired by Dietmar Binkowk- increasingly scrutinised, as typified by come the company’s new owners after a sa, former CEO of NRW Bank. Former the latest Annington acquisition. €2.2bn debt-for-equity swap. lenders and now new owners are re-

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from page 21 ported to include Cerberus Capital an undisclosed price, but thought to Germany/Legislation Management, Marathon Asset Man- be more than €100m at least. Black- Mietpreisbremse passes agement, Varde Partners, Aurelius stone is partnering with co-investor into law, changes ahead for Capital Management and Davidson Finch Properties Asset Management brokers Kempner Capital Management. on the deal. IVG clarified in a recent statement Blackstone has also committed to The German government passed into that it has taken a new operational di- buy the nearby Messeturm scheme draft law this week the infamous Miet- rection, establishing three business ar- from German fund managers GLL and preisbremse, or rental cap on residential eas as independent business units - real KanAm for €250m. The asset had rent increases, while at the same time in- estate, institutional funds and caverns. been said to be optimistically valued at troducing a change to the time-honoured It sold its €3.5bn private fund business €400-500m. German system of nearly always having to Stuttgart-based closed-end fund Built in 1991 by Tishman Speyer the tenant or the buyer pay the broker’s manager Deutsche Fonds Holding in as Europe’s largest skyscraper, the commission on a property transaction. March. Assets under management – in- 247-metre high office tower offers The law now only needs the ratifica- cluding around €11bn in the institutional 62,000 sqm over 63 storeys. Its main tion of the Upper House, or Bundesrat, funds unit which it is still holding on to, tenants are Goldman Sachs and the to fully come into effect. Given the huge are worth over €15bn. Bank of New York Mellon. government coalition majority, and the Meanwhile, US private equity giant GLL and fund manager Kanam left-leaning opposition parties assertion Blackstone has signed on the acquisi- bought the asset from the developer that the bill does not go far enough, its tion of the 130m-tall Pollux office tower for around €440m in 2002. The tow- passing is considered a formality. in Frankfurt’s Westend central busi- er is about 70% leased. The building, From the middle of next year, Ger- ness district from IVG Institutional which is being sold through JLL, was many’s federal states will be able to im- Funds. The 32,000 sqm Pollux proper- refinanced in early 2012 with a €155m pose rental caps on residential markets, ty over 32 floors is largely vacant and loan from Pbb Deutsche Pfandbrief- freezing them at 10% above an agreed after been tenanted by Commerzbank bank and Landesbank Baden-Würt- ‘rent table’ (Mietspiegel) or acceptable for many years, and is being sold for temberg (LBBW). average price for a neighbourhood. The move is designed to cool rampant rent rises in areas designated to be in high demand and to protect tenants fearful of being priced out of urban living areas. In certain cities, increases in rent of be- tween 30% and 40% have not been un- usual, prompting demands for legislation to curb price inflation. As it stands, the individual states can identify the regions in which the cap will be applied to rental renewals, with the law remaining in effect for five years, af- ter which it may be extendable. The law must first be enacted at a state level by each of Germany’s 16 state governments. A complicated process of defining which regions or neighbourhoods could now be defined as “tense markets” will now be played out a local level across the land. Certain exceptions are permitted; so as not to discourage much-needed new housebuilding, the rental cap will not be applicable to new buildings, nor to those first-time rentals that have just Germany house price development 23 www.refire-online.com

undergone “extensive paid by the prospective Germany/Acquisitions refurbishment”, defined tenant, and as the land- Newcomer Westcore buys as having had capital ex- lord doesn’t have to pay Berlin complex, GE in debt penditure equivalent to the bill, landlords nearly deal about a third of the price always engage a broker of a new apartment. as mediator. The San Diego-based Westcore has Rents currently at more Justice Minister Heiko made its first foray into the German mar- than 10% above the Mietspiegel will be Maas, who has been the Minister most ket with the purchase of the Anthropolis frozen at their current level pending other closely involved in the introduction of the office complex in Berlin from Goldman prices catching up. new measures, said the bill would en- Sachs’ Archon Group. The group plans A second part of the bill concerns sure “that the tenants’ predicament is no further acquisitions in Germany, it said. another key part of the reform, what’s longer exploited on the accommodation The Anthropolis office complex has known as the “Bestellerprinzip” or “the market, and that the general principle of 36,700 sqm of gross lettable space, of commissioner’s principle”. In future, this ‘whoever commissioned it should pay for which 16,000 sqm are protected his- should mean that whoever commissions it’ will apply.” toric buildings. The current vacancy a real estate agent should then be re- The property owners’ trade association rate is 30%. Robert Roethenmund of sponsible for paying that agent’s fees. IVD said it was already preparing a case for Westcore Europe said his group plans These can be hefty in Germany, normally Germany’s highest constitutional court in to upgrade and re¬brand the office amounting to two or three months’ rent- Karlsruhe to declare the law illegal, claim- park, which was built on a former AEG al as commission, with a further 19% ing that it breaches the freedom of individ- site between 1993 and 1997, at a de- VAT on top. This has traditionally been uals to freely act as independent brokers. velopment cost of €350m. 24

...... UPCOMING EVENTS AND CONFERENCES

EVENTS/ CONFERENCES Westcore’s investing roots are on the €10m. Again, Berlin is the principal desti- Oct -Nov 2014 US West Coast, where it has traditional- nation, but the fund will this time include ly focused on multi-tenant industrial and other northern German cities, particularly October 6th-8th, Monday-Wednesday office properties at unit values of €20m Hamburg, Hanover and Bremen. EXPO REAL - the 17th International Trade upwards. It has more than €3bn of as- According to Goesta Ritschewald, Fair for Property & Investment, Munich sets under management worldwide, and managing partner at Deutsche Invest- The key event in the German commercial has already made initial investments in ment, about 25% of the new fund will be real estate calendar www.exporeal.net, Austria and Switzerland. invested in development projects includ- investors and city authorities, focusing The Westcore deal sees debt fund GE ing forward deals. DI will handle the fund on residential, commercial, retail and Capital Real Estate expanding its busi- management, while ZBI will again be hotels. New innovative ideas for a city ness into Germany, its first deal in the responsible for operative aspects, han- suffering from a shortage of space. German market. It will provide a €16m fa- dling asset and property management. It More at www.http://www.esporeal.net cility to Westcore, with an additional loan has several offices in northern Germany to cover future capex. GECRE has made and is specialised in residential property, November 6th-7th Thurs-Friday more than €4bn of loans in the last year having issued housing funds targeted at CREFC Autumn Conference, London in the UK, mainly in acquisition finance private and institutional investors since GRI new financing structures, the Span- and refinancing of office and logistic/light 20012. It currently has more than €2bn ish market, a beginner’s guide to effec- industrial assets. of assets under management, with more tive regulatory engagement and high It now says it has identified German than 29,500 residential units. quality securitisation (HQS). The day as one of the core markets to provide Deutsche Investment is a subsidi- will close with a networking reception. senior lending up to 75% LTV. The ticket ary of the DSR Deutsche Seereederei Reconvening on Friday, 7 November we size for single assets is between €15m Group based in Rostock, originally a will listen to experts discuss European and €100m and for portfolios between maritime holding company now with debt liquidity, finding relative value, re- €50m and €400m. According to Frank tourism, property, financial services and invention of mezzanine debt and the eq- Roseen, GECRE’s managing director for healthcare interests. uity and debt view on the private rented Germany and CEE, “We are looking to sector (PRS). lend around €1bn in Germany in the next More: www. crefceurope.org 18 months”. Germany/Spezialfonds Dutch Bouwfonds IM buys November 24th-25th Monday-Tues three residential projects for GRI Deutsche Wohnen, Berlin Germany/Spezialfonds Spezialfonds The first edition of the GRI concept fo- Deutsche Investment and cused on German residential, being held ZBI launch second residen- Bouwfonds IM, the property investment at the Bristol Kempinski. Public and mu- tial fund management company of the Nether- nicipal property companies, German and lands group Rabo Real Estate, has just international investors, developers and The Hamburg-based Spezialfonds initi- bought three new residential construc- lenders will discuss where the opportu- ator Deutsche Investment and Erlan- tion projects in Berlin, Dresden and Co- nities lie and what the headaches in the gen-based ZBI Zentral Boden Immo- logne in three separate transactions, on sector are. bilien Gruppe are teaming up again to behalf of a southern German institution- more at: http://www.globalrealestate.org/ launch a second German residential al investor. The price paid was just over DeutscheWohnen2014 fund. Their first joint fund, Deutsche In- €60m. vestment - ZBI Wohnen I, had invested The three new construction projects October 6th-8th, Monday-Wednesday €160m by the end of July 2014, mainly in comprise a total of 274 residential units, ULI Leadership Award & Urban Leader Berlin, with the planned volume of €180 128 underground parking spaces and 70 Forum - Hamburg shortly to be fully invested. outdoor parking spaces, expected to be The ULI annual awards for leading per- The new fund - Deutsche Investment completed by 2015 to 2016. Bouwfonds sonalities in the categories of Young - ZBI Wohnen II - will have a full target IM is acting as the residential property Leaders, City Planning/Administration , volume of €200m with 50% leverage portfolio manager for the real estate fund Real Estate Industry, and more and aims to yield 5.5% IRR over a 10- on behalf of the German ‘Versorgung- More at www.http://german.uli.org year period, for a minimum investment of swerk’ or occupational pension fund,

...see page 28 25 www.refire-online.com

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SWISS LIFE BUYS CORPUS SIREO, THE LEADING INDEPENDENT REAL ESTATE ASSET MANAGEMENT SERVICE PROVIDER IN GERMANY

from Switzerland and France to also like to give greater consideration Germany,“ says Patrick Frost, CEO again to co-investments. We are loo- of the Swiss Life Group. „Given our king forward to taking the next steps more than 150 years of experience in in our development alongside Swiss the real estate business and the ad- Life,“ says Ralph Günther, spokes- ditional expertise contributed by the person for the Management 550 employees of CORPUS SIREO, The business segments acquired by we are confident that we will be able Swiss Life comprise: to successfully expand this business - Asset management (commercial, area further.“ residential and retail) with full- Swiss Life is acquiring CORPUS service solutions for acquiring, op- SIREO and becoming a leading real CORPUS SIREO, with its head office timising and marketing customers‘ estate asset manager in Germany. in Cologne, was founded in 1995 and real estate portfolios or individual has since evolved from a regional properties; The Swiss Life Group is expan- real estate brokerage company into - Project development including the ding its position in real estate asset the leading German independent real design, building and marketing of management by acquiring CORPUS estate service provider, winning a residential projects; SIREO, the leading independent real number of awards over the past years - Investment management compri- estate service provider in Germany, as the top real estate asset manage- sing the design, launching and with retroactive effect from 1 January ment service provider in Germany. management of indirect real estate 2014. The sellers of the company are The company is also one of the investments; three German savings banks: Spar- two most popular employers in the - Marketing of residential property kasse KölnBonn (50%), Stadtspar- German real estate sector. CORPUS in the conurbations of Cologne / kasse Düsseldorf (25%) and Frank- SIREO provides real estate services Bonn, Düsseldorf and Frankfurt, furter Sparkasse (25%). This makes for third parties through its 11 branch as well as commercial properties Swiss Life a leading real estate asset offices in Germany and Luxembourg. throughout German manager in Germany. The purchase The company manages some EUR 16 price is EUR 210 million. Pending billion in real estate assets and gene- Swiss Life approval by the competition authori- rates revenues of approximately EUR ties, the transaction will be comple- 160 million. Its customers include The Swiss Life Group is one of ted in the course of the second half investors, banks, and companies with Europe‘s leading comprehensive life of 2014. proprietary real estate portfolios. and pensions and financial solutions providers. In its core markets of Swit- „This acquisition is an important step „With the globally focused Swiss zerland, France and Germany, Swiss to extending our position as a leading Life as its new owner, CORPUS SI- Life offers individuals and corpora- provider in one of our core strategic REO will be able to further develop tions comprehensive and individual areas, real estate asset management, its business systematically and enter advice plus a broad range of own and new markets. To this end we would partner products through its sales

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CORPUS SIREO head office in Cologne

force and distribution partners such benefits solutions and high net worth Further information: as brokers and banks. individuals with structured life and swisslife.com and corpussireo.com pensions products. Swiss Life Select, tecis, HORBACH, Proventus and Chase de Vere ad- Swiss Life Holding Ltd, registered visors choose suitable products for in Zurich, was founded in 1857 as customers from the market according Schweizerische Rentenanstalt. The to the Best Select approach. Swiss shares of Swiss Life Holding Ltd are Life Asset Managers offers instituti- listed on the SIX Swiss Exchange onal and private investors access to (SLHN). The Swiss Life Group investment and asset management employs a workforce of around 7000, solutions. Swiss Life provides multi- with approximately 4500 certified national corporations with employee financial advisors.

Cautionary statement regarding forward-looking information This publication contains specific forward-looking statements, e.g. statements including terms like “believe”, “assume”, “expect” or similar expressions. Such forward-looking statements, by their nature, are subject to known and unknown risks, uncertainties and other important factors. These may result in a substantial divergence between the actual results, developments and expectations of Swiss Life and those explicitly or implicitly described in these forward-looking statements. Given these uncertainties, the reader is reminded that these statements are merely projections and should not be overvalued. Neither Swiss Life nor its Mem- bers of the Board of Directors, executive managers, managers, employees or external advisors nor any other person associated with Swiss Life or with any other relationship to the company makes any express or implied representation or warranty as to the correctness or completeness of the information contained in this publica- tion. Swiss Life and the abovementioned persons shall not be liable under any circumstances for any direct or indirect loss resulting from the use of this information. Furthermore, Swiss Life undertakes no obligation to publicly update or change any of these forward-looking statements, or to adjust them to reflect new informa- tion, future events, developments or similar. Board of CORPUS SIREO Holding GmbH & Co. KG.

Sponsored Statement 28

...from page 24

and Institutional Investment-Partners estate, communication infrastructure, tors. Our objective is to substantially in- (2IP) is managing the master fund as the parking and agriculture. crease assets under management and to investors’ asset management company Institutional Investment-Partners is expand our presence both in Germany for the German institutional investor. managing the corresponding master and across Europe. As a ‘hands-on’ as- The projects are located in the districts fund as the investors’ asset management set manager, we are well positioned to Berlin-Köpernick, Dresden-Südvorstadt company as a KVG and risk manager. handle the acquisition and sale of assets and Kóln-Nippes. This boosts the size of and portfolios on behalf of clients as well the fund’s residential portfolio to around as the associated leasing, refurbishment, €163m, while an additional €240m euros Germany/Asset Management maintenance and oversight of day-to-day are to be invested in existing properties Alvarez & Marsal buys Ger- property management, which are all cen- and new construction projects in ‘attrac- many’s Captiva Capital tral to achieving their business objectives.” tive residential markets’ over the next 18 Management months. Operating with a sole mandate, Bou- US-owned professional services firm Al- Germany/Hotels wfonds IM has taken over the portfolio varez & Marsal this week bought Captiva German hotel investment and asset management for the German Capital Management GmbH, a Ham- maintains momentum, volume institutional investor for the ‘Residential burg- based real estate asset manage- doubles in 1H property’ segment of the real estate Spe- ment firm. CCMG will now be called A&M zialfonds. According to Michael Keune, Captiva , with which A&M aims to provide A new report published by hospitality fund manager at Bouwfonds IM: “The end-to-end real estate advisory, asset consultancy HVS says that German hotel aim is to invest a total of €240 million of management and investment services. investment volume had almost doubled net assets in the next 12 to 18 months A&M Captiva will now manage about to €1.5bn after the first seven months of in conurbations showing strong growth €700m in German commercial real estate this year, with the likely full-year figure for the ‘residential property portfolio’ of assets on behalf of institutional clients. headed for over €2bn. the real estate fund.” Bouwfonds IM has According to Robin Priest, A&M’s Euro- The German hotel sector is currently more than €6bn of assets under manage- pean CEO, “Germany is a key European one of the most in-demand in the world, ment in commercial and residential real real estate market for international inves- propelled by low interest rates and debt

GRAPH-3

Total Return Performance GPR 250 Index (€) 150

100

50

GPR 250 Europe

GPR 250 Germany

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

Source: Global Property Research (www.globalpropertyresearch.com), 2014

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

availability that has returned to pre-crisis the past four years. The average room levels, HVS found in its report. price for a hotel in the city rose to a re- Following the global financial crisis cord €269,000 last year, 15% above the sector has been on a general recov- 2007 levels. Frankfurt displayed the ery and is now even exceeding its 2007 highest growth rate over the period, at peak. Major recent transactions include 25%, to €212,000 per room. Düsseldorf Accor’s €722m portfolio acquisition from and Leipzig posted 20% increases to two Moor Park funds, in a reverse of €173,000 and €130,000. Accor’s sale-and-leaseback of effective- “More risk-enthusiastic investors, ly the same portfolio to the firm in 2007. such as private equity funds, may even ume reached €9.7bn in the first nine Ivanhoe Cambridge also sold 11 Ger- see the current climate in Germany as a months of this year, up 14% on last year. man assets, part of a portfolio of 18 Euro- perfect time to exit this market and be- Of this, 82% (140,300 units) was trans- pean hotels, to Apollo Global for €425m. gin to look for higher returns elsewhere acted in so-called B-cities due to high According to HVS’s senior associate in Europe,” added HVS director Arlett prices and stiffer competition in Germa- Veronica Waldthausen, “The hotel mar- Oehmichen. He expects full-year trans- ny’s biggest cities. ket has mirrored the wider commercial real action volume to exceed €2bn for the According to long-term CEO Ulrich estate market, in that higher-yielding op- first time ever, despite a lack of sufficient Jacke, (above) “The German housing portunities in secondary markets are be- hotel assets matching investors’ needs. market continues to attract enormous coming more sought after. There are more interest from institutional investors. Due transactions occurring in eastern Germa- to the continued competition and an in- ny, with both Dresden and Leipzig definite- Germany/Residential creasing price sensibility, B cities are es- ly on investors’ radar. Budget hotels are German residential deals now pecially moving into investor focus. This also prime targets, as room yield growth mainly in B-cities – Study is where they find a better risk-return pro- forecasts in this sector remain strong and file in the residential sector.” The has also investment opportunities are plentiful.” A new study by Frankfurt-based residen- had the side-effect of lowering the aver- Hotels in Munich have the highest tial brokers Dr. Lübke & Kelber shows age transaction costs per deal, which fell value, though growth has slowed over that German residentialGRAPH-1 investment vol- to €56,900 or 13% lower than last year.

Total Return Performance GPR 250 Index (€) 200

GPR 250 Europe

GPR 250 Germany 150

GRAPH-1

100

Total Return Performance GPR 250 Index (€) 250

GPR 250 Europe

50 200 GPR 250 Germany

150 0 Sep-09 Mar-10 Sep-10 Mar-11 Sep-11 Mar-12 Sep-12 Mar-13 Sep-13 Mar-14 Sep-14

Source: Global Property Research (www.globalpropertyresearch.com), 2014 100

Graph of the total return performance of Europe and GermanyPage 1 in Euro currency over the past five years REFIRE charts courtesy of GPR, Global Property Research 50

0 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14

Source: Global Property Research (www.globalpropertyresearch.com), 2014

Page 1 30

Some 78% of investors were German said Jacke. These deals account for 48% vestors with competition being far low- groups, down from 83%. The most active of total volume. The largest one in 3Q14 er than in A-locations. Germans should foreign investor groups were the Aus- was the sale of the 13,300 Berlinovo flats dominate the segment, as international trians, with a 10% share, mainly due to to Berlin-based Westgrund for €390m. investors remain focused on the larger the newly-listed BUWOG buying 18,000 “Due to the lack of large portfolio of- urban centres. units for €900m. Listed firms or REITs fers on the market, activity for the rest of Dr. Lübke & Kelber is an independent took up a 56% share of total volume. the year should remain moderate,” said property service company owned by its “The six largest transactions were done Jacke. He expects a full-year volume of managers which is focused on asset by stock exchange-listed companies,” €12bn, about the same level as last year. management, asset acquisition and mar- B-cities are set to continue attracting in- keting and transaction advisory, with par- ticular emphasis on the residential sector. It maintains six offices across Germany.

Germany/Residential Israeli group Brack Capital boosts German residential to 9,000 units

Düsseldorf-based Brack Capital Prop- Drive better performance, erties, a unit of Tel Aviv-listed Brack Capital Real Estate, said it expanded its improve sustainable returns German housing portfolio by 1,600 units to 9,000 in the second quarter. The latest ac¬quisitions, of 267 units, are mainly in North Rhine-Westphalia and Hanover. BCP now owns 9,000 units in Leipzig, North Rhine-Westphal¬ia and the Bremen and Hanover area, it said. It also owns 380,000 sq.m. in retail space and two de- velopments in Düsseldorf with over 1,000 units, altogether valued at €1.05 bn. It recently acquired a portfolio of residen- tial and office buildings in Düsseldorf for €13m, funded by a non-recourse loan of €8m from a German bank. The assets are let to various tenants, with an occupancy rate of 84%, and should generate an an- nual income of €1.1m. BCP also recently bought the Widum- er Platz shopping Centre in central Cas- trop-Rauxel in North Rhine-Westphalia, a five-story property built in 1990 with 13,100 sqm lettable retail space for 19 stores, and five medical clinics. The seller was Roma- nian group Dinu Patriciu Global Proper- ties (DPGP) which had bought the asset from Deutsche Land plc, and prior to that www.drivebetterperformance.com was the single asset in a €10.7m fund is- sued by the IC Group. The asset will need 31 www.refire-online.com

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Identifying suitable investors as a seller Storing precise search profiles as an investor • Confidential transactions • Focused placement of investment desires • Qualified matching of investors • Profile is only shown to suitable sellers • Detailed matching analysis • Success through discretion and efficiency

AZ_Immonet_Investment_A4_hoch_englisch_02.indd 1 21.02.14 14:06 32

at least €3m capex prior to its 25th anniver- multi-family housing as well as retail as- Germany/Acquisitions sary next year, said BCP. sets and our own project development France’s LFPI to double Ger- In a statement, COO Claus-Dieter activities. We want to expand further in man investment by next year Trapp commented that BCP looks at these three business areas.” assets in A, B and C locations, analys- Brack Capital Real Estate is interna- Vienna-based fund manager FLE, part ing each individual property minutely for tionally active in investment, develop- of French private equity groupand multi-as- tenant structure an local preferences. ment and asset management, with $5bn set manager LFPI, said it is expanding its “Over recent years, BCP has significant- holdings in the US, Germany, India, Rus- German and Austrian holdings from its cur- ly expanded its property portfolio with sia, UK, Spain, Italy, Cyprus and Israel. rent €410m to 600m by the end of next year. The LFPI group, whose principal sponsor is Lazard, has an investment portfolio valued at more than €3bn. FLE, which focuses on commercial and hotel properties, has just bought a new office building in Heidelberg for its Luxem- bourg vehicle FLE SICAV FIS, which holds about half (€1.5bn) of the group’s assets. This is the seventh acquisition the group has made in Germany this year, after buys in Stuttgart, Bielefeld, Ratingen, Berlin, Hamburg and Kaiserslautern. FLE manages the FLE SICAV FIS and LFPI REIM, launched in 2013, on behalf of the parent company. Both funds focus on office and retail as well as low budget hotels with an investment volume of up to €35m in mid-sized German cities, the Vien- na region and Austrian regional centres. The 8,000 sq.m. office comprises three separate buildings and has 96% occupan- cy, with the main tenants including a job Synergy centre, the Federal Employment Agency The interaction of two or BfA, a local development agency and Hei- more elements to produce delberg’s College of Education. a combined effect greater than the sum of their parts According to Dr. Alexander Klafsky, the CEO at FLE, “Within our investment When you need an edge strategy, we prefer modernised commercial When one plus one needs to equal three When good is not good enough assets in central locations with good pub- That is when you need Situs lic transport links, high occupancy, strong

Situs provides: tenants and sustainable cash flows, and • Real Estate Advisory Services these criteria are all fulfilled by this asset. • Primary Servicing/Loan Workouts • Outsourcing Platforms The current transaction shows the attrac- tive investment opportunities in mid-sized German cities.”

Hugo Raworth Bruce Nelson LFPI’s strategy is centred around fami- +44 (0) 20 7220 1852 +44 (0) 20 7220 1850 [email protected] [email protected] ly businesses (50%) and real estate (15%) with other major investment in in syndicat- ed lending (20%) and stock exchange list- ed companies (15%). Its investors are 80% institutional and 20% private individuals. 33 www.refire-online.com

Deutsche GRI BERLIN 24 25 NOVEMBER WOHNEN 2014 KEMPINSKI HOTEL BRISTOL

Identifying opportunities in the German residential market

Alexander Happ Andreas Schillhofer Jürgen Leibfried Gero Bergmann Managing Director Mitglied der Geschäftslei- Managing Partner Member of the BUWOG MEERMANN tung Deutschland BAUWERT Management Board MEDIOBANCA BERLIN HYP

Marcus Eilers Peter Brock Thomas Meyer Ulrich Graebner Director Asset Mgmt Managing Director Vorstand Managing Director ROUND HILL CAPITAL GRAINGER WERTGRUND LEONARDO & CO. DEUTSCHLAND IMMOBILIEN ...and many more

A SELECTION OF THE DISCUSSIONS ON THE PROGRAMME

PORTFOLIO TRANSAKTIONEN - Ist die Zeit der grossen Portfolios vorbei? SANIERUNG - Scha t nachhaltige Weiterentwicklung wirklich mehr Wert? PORTFOLIO TRANSACTIONS - How much more to come? REDEVLOPEMENT/RESTORATION - Is sustainable development nice or a must?

BERLINER WOHNUNGSMARKT - nachhaltiges Wachstumspotenzial? DEMOGRAPHISCHER WANDEL - wechselnde Anforderungen an Bestandshalter, BERLIN RESIDENTIAL - Is the growth sustainable and lasting? Entwickler, Finanzierer HOUSING REQUIREMENTS - Implications and solutions to changing demographics FINANZIERUNGSALTERNATIVEN - Mezzanine, Pfandbrief, Unternehmensanleihe MEZZANINE, CORPORATE BONDS, CMBS - What is the right mix? BSTANDORTE UND CSTANDORTE - welche Wachstumsmärkte abseits der Grossen? INVESTING IN BCITIES AND CCITIES - Neglected or is the growth out there?

...and many more All material throughout is subject change without notice. throughout to material All

CONTACT US

Juliana Servile-Smith, Project Manager T + 44 (0)20 7121 5094 | [email protected] www.globalrealestate.org/DeutscheWohnen2014

GRI meetings provide a forum for the world’s leading real estate players to develop valuable relationships, find new business partners, and strengthen their global networks. 34

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