Volume 7, Issue 139, December 2nd, 2015 New report on German logistics market Inside REFIRE highlights key role of foreign investors REFIRE is a specialised report focused on providing market intelligence and back- A major new report on the German logistics market by market researcher Bul- ground analysis to finance professionals wienGesa throws up a number of surprises, including several names that might in German and continental European real not have figured on our own speculative list as to who are Germany’s most active estate investment. investors in the sector. Ths study, based on a proprietary database of 1,205 new logistics buildings and 574 recorded transactions covering 19m sqm analyses the Whatever your particular area of speciali- German logistics market for the five-year period 2010 to 2014. sation, we think you’ll find timely, incisive information within our pages, helping to in- This includes assets under 5,000 sqm Radical new reform package form you of the key deals, the numbers, the (which are frequently ignored in oth- heading for gov’t ratification markets, the players and the people. er studies), to give effective overage of Investors in German residential housing about 26% of the whole German market. need to be aware of potentially very sig- The areas we focus on are: A key finding is the emergence of nificant changes to the tenancy laws that the big retailers as key investors in the are making their way through Berlin’s Min- US Funds in Europe group. In terms of sqm of logistics prop- istry of Justice and headed for ratification European REITs erty built over the period, the leader is by Germany’s Bundestag... see page 6 German Real Estate Finance Goodman with 1.26m sqm, followed German Non-Performing Loans (NPLs) by three retailers – Schwarz Gruppe M7 boosts expansion with new Retail Property Funds (Lidl, Kaufland) with 657,000 sqm, Dutch, German acquisitions Mortgage Securitisation Edeka with 388,000 sqm, and REWE The fast-growing UK-based M7, a spe- CMBS/RMBS with 366,000 sqm. In fifth place is auto- cialist investor and asset manager of Privatisations maker Volkswagen with 353,000 sqm. multi-let real estate across Europe, has Refinancing Among Goodman’s clients are retailers had a busy couple of months, closing on Euro-zone Property Financing Amazon and Zalando. fundraising on no less than three of its BulwienGesa’s Tobias Kassner, the funds just in the month of October. page 8 REFIRE has an extensive network of con- report’s principal author, says his re- tacts in the field of continental European search team was surprised at the ex- Pramerica and QInvest buy real-estate finance, which enables us to tent of new building by retailers, now at 16-property German retail bring you the latest and most relevant news. 25%. Another factor making it attractive portfolio However, we always want to know more for own-users to build their own logis- Pramerica Real Estate Investors and QIn- about what’s going on in this dynamic sec- tics properties is the continued low level vest, Qatar’s leading investment bank, tor, so make sure your company is keeping of interest rates, he said. have bought a portfolio of 16 retail prop- us informed of your moves. Send your me- At nearly 75% owner-occupiership, erties located across Germany through dia communications to news@refire-online. Germany is far ahead of the USA and a newly formed joint venture. The sell- com for our consideration. other markets, where the owner-occupi- er is a joint venture of Hahn Group and er rate is more like 30%. Indigo Invest, but the terms of the deal BulwienGesa expects the figure for were not disclosed. see page 11 CONTENTS in this Issue: 2015 to be 3.6m sqm, or about 5.5% less than in the record year of 2014 (3.8m Vonovia gets green light for DEALS ROUNDUP / from page 3 sqm). Retail saturation and the lack of full-on Deutsche Wohnen bid EDITORIAL / page 4 building space in numerous regions is be- Shareholders in Vonovia, Germany’s REPORT - /ROUNDUP page 10 ing felt in the industry, which will have to largest residential property company, UPCOMING EVENTS / page 29 lead to space recycling and more brown- gave their company the green light this PEOPLE…JOBS…MOVES / field developments. These currently rep- week to go ahead with its bid for Germa- SUBSCRIPTION FORM / page 36 resent 20% of all new construction (even ny’s number 2 player Deutsche Wohnen higher in the classical logistics regions of AG. Deutsche Wohnen is resisting the the Rhine and the Ruhr, where they can takeover, and last week...see page 12 2 3 www.refire-online.com

...... DEALS ROUNDUP

reach 80%), and are likely to increase. ments were €9.8m per property, some sqm of logistics space in 2005 to an same time, site units that unite different Germany/Logistics REFIRE The researchers point to another needed over €100m, particularly for expected record take-up of 5.8 million types of warehouses such as fulfilment Key logistics transactions in Real Estate Finance trend, that of smaller and more decen- larger warehouses or portfolios. Overall sqm in 2015.” centres, cross-dock facilities, high-bay November – roundup Intelligence Report Europe tralised buildings of un- financing since 2010 “At present, the market is registering warehouses and temperature-controlled der 25,000 sqm. This “About 40% of the market is expected to reach unbroken demand for spacious logistics logistics spaces and cover all aspects of A number of significant logistics deals sort of size is prime is now in the hands of the big €11.6bn by year-end. properties larger than 100,000 sqm and storage, commissioning and distribution took place throughout November involv- Operating Office territory for project de- Mortgage banks and more in size, as well as for smaller deliv- will be of greater importance in the com- ing several key players in the sector and REFIRE developers Alpha Industrial, Habsburgerallee 95 velopers, making up Goodman, IDI Gazeley, Panat- Landesbanken are the ery centres close to customers with ex- ing years. banks that have committed increasing 60385 Frankfurt am Main, GERMANY about 40% of all new toni Europe, Prologis and most active lenders in pansion options such as pick-up points,” “Warehouses in good locations are resources to German logistics. Tel: +49-69-49085-785 logistics construction, the field, responsible for said Ertan, commenting on the latest de- also becoming more significant again be- Dutch property group Genaba Prop- Fax: +49-69-49085-804 Segro. With new construction Email: [email protected] a percentage which is volume of 2.4m sqm these 37% and 30% respec- velopments in the lettings markets. cause online retail requires ever shorter erties paid €150m for two logistics build- forecast to increase. Big Six are well ahead of the tively. Mezzanine areas also increasingly distances to the end user. Fifteen years ings and a light-industrial property with Managing Editor: Another highlight is In project develop- need to be available for small order pro- ago, central warehouse locations were a total of 195,000 sqm in Germany. The Charles Kingston nearest 14 German competi- Tel: +49-69-49085-785 the proportion of for- tors at 2.0m sqm” ment financing, Landes- cessing and returns management. These still being torn down and converted into assets are in Mülheim (a business park Fax: +49-69-49085-804 eigners investing in the banks are ahead of the are often not available in older warehous- offices or housing. Today, there is a rap- with 122,000 gross lettable area), Ulm Cell: +49-172-8572249 segment, says BulwienGesa. About 40% mortgage banks, with a 33% share es or have to be built at considerable cost. idly growing trend to preserve and mod- (24,500 sqm), and Gottmadingen near Email: [email protected] of the market is now in the hands of the compared to 28%. These are followed Universal, flexible warehouses in central ernise these sites, since rents have also Lake Constance in the south of Germany Subscriptions: big developers Alpha Industrial, Good- by savings banks (Sparkassen) at 11% locations are therefore in demand. At the risen significantly,” said Ertan. (with 49,000 sqm). Tenants include Sie- Tel: +49-69-49085-785 man, IDI Gazeley, Panattoni Europe, and co-operative banks (Volksbanken and Fax: +49-69-49085-804 Email: [email protected] Prologis and Segro. With new construc- Raiffeisenbanken) at 7%, who traditionally tion volume of 2.4m sqm these Big Six have strong sector-specific local knowl- Advertising: are well ahead of the nearest 14 German edge. Heading the overall list of lenders to Tel: +49-69-49085-785 Fax: +49-69-49085-804 competitors at 2.0m sqm, and look as if the sector is the Frankfurt-based Helaba, Wüest & Partner Email: [email protected] they are going to extend their lead. followed by mortgage banks Berlin Hyp Germany Including all foreign investors, the for- and pbb Deutsche Pfandbriefbank. Editorial Advisory Board: Klaus H. Hausen eign share of the market rose to 68% in The BulwienGesa researchers note Colm O’Cleirigh, B.Arch.Sci. 2014 from 27% in 2010. that the time it takes from the loan ap- Margarete May, Rechtsanwältin We provide the strategic decision- Part of the reason for this, according plication to signing the contract normal- David Scrimgeour, MBE Christian Graf von Wedel to Kassner, is “the stronger degree of ly ranges between six and eight weeks. tools for your success Glenn J. Day FRICS professionalisation in their Anglo-Saxon The average loan-to-value is 65%, about Andreas Lehner domestic markets.” As a result, these 5%-15% below that of traditional office or Stefan Engberg, MRICS groups had recognised earlier than others retail assets due to the shorter life cycle of Wüest & Partner combines the benefits of individual Publisher: the increasing significance of Germany as the asset. The maximum loan-to-value for experts − such as personal skills and responsibility − with REFIRE Ltd., a logistics location – while German devel- ultra prime assets can go as high as 92%, 49 Sandymount Avenue, the kind of extensive market knowledge typically found at Ballsbridge opers showed little international ambition the BulwienGesa team found. major consulting firms. Dublin 4, Ireland and were content to live with their region- al networks, with some few exceptions Lettings Wüest & Partner combines a market-driven approach Real Estate Finance Intelligence Report Europe such as Garbe Logistics. (REFIRE) is published 22 times a year, at the be- with exceptional methodological know-how. The consultants Another factor viewed as important by A new note issued this week by Ger- ginning and in the middle of each month, with are experts in national and international valuation methods. two holiday breaks. REFIRE is editorially inde- the international investors is the re-sale- man group Realogis, which has carved pendent of any selling or investing institutions. In- ability of their assets, increasingly insist- out a 10% share of the German logistics formation contained in REFIRE is under copyright Wüest & Partner offers broad market information and protection and is based on sources believed to ing on certificates of sustainability. Barely letting market since its foundation in be reliable, though their complete accuracy can- 20% of all buildings completed before 2005, highlights how the lettings market advisory services, in addition to traditional valuation and not be fully guaranteed. Neither the information 2014 had these, and only 14% of new has similarly more than doubled in the appraisal reports, to all market participants. contained in REFIRE nor the opinions expressed therein constitute or are to be construed as con- building land were certified with any form last 10 years. stituting an offer or solicitation of an offer to buy of “Green Label”. According to Umut Ertan, the Wüest & Partner or sell investments. REFIRE accepts no liability founder and main shareholder of the for actions based on the information herein. Neue Schönhauser Str. 20, 10178 Berlin Germany, T +49 30 2576 087-0, [email protected] Financing Munich-based group, “The total let- © 2015 REFIRE Ltd. tings market has more than doubled in While the average financing require- the last 10 years, rising from 2.7 million 4 5 www.refire-online.com

...... EDITORIAL

A good dose of Alpine air works wonders for gaining fresh perspectives

REFIRE attended the ReComm Real that might help them profit from Black ity and furthered the country’s antifragil- Estate Leaders Summit in Kitzbühel in Swan events. ity. Two different countries committed to the Austrian Alps recently. This Taleb bemoaned the fact that rigid dynasties and an abhorrence of vol- mens, Co-op and aluminium processor real estate lending activities at DekaBank the Silver German Sustainable Building was the fourth year the event many people took the wrong atility are fragile, and will crash. Syria has Constellium. The weighted average commented: “This financing follows on Council (DGNB) certificate. The asset is has taken place but for your ed- message from The Black Swan, already done so and Saudi Arabia will lease term is ten years, and yield more the back of other successful deals already fully leased to mail order firmOtto , owned itor, it was his first visit. Most thinking it was about trying to crash probably within the next five years, than 10% IRR. Financing partners were financed in Germany this year by Deka- by ECE’s controlling Otto family, and will certainly not his last. predict the unpredictable. It’s re- predicted Taleb. Deutsche Pfandbriefbank in Mülheim, Bank involving core assets and experi- be used by the Hermes group. The charm and relative ally about knowing, in the event Since the early days of Fooled by Ran- HypoVereinsbank in Ulm, and Helaba enced sponsors.“ Tilad is a Gulf-based multi-family of- seclusion of Kitzbühel, with of such a random event, who is domness, we have always found Taleb in Gottmadingen. The deals boost Gena- An affiliate of Dubai-based multi-family fice, which coordinates real estate in- or without snow, is clearly a harmed and who benefits. a most stimulating writer, and his early ba’s German portfolio to €680m. office Tilad has bought a logistics centre vestments in Europe and North America drawing factor in enticing the Invest in businesses that musings helped fuel our interest in gam- DekaBank financed a German port- project in northern Germany from giant on behalf of its sponsors. Among recent top brass of the collective Aus- have had lots of small shocks, ing and probability theory – an interest folio of three core logistics assets on be- Hamburg-based developer ECE in a for- acquisitions in Germany is the 48,000 trian real estate industry to down tools he advised, because then you know which has proved enduring. He proved half of a joint venture between the UK ward deal, thought to be for about €90m. sqm office complex in the Berlin district in Vienna and disappear off to the Tyrol they’re not hiding vulnerability. Com- no less agreeable in person at our various REIT Segro and a Canadian pension The Hermes Logistics Center devel- of Charlottenburg, and a 28,000 sqm re- for three days. Although it brings the panies become antifragile when they’ve gatherings in the Alpine air. When choos- fund. The loan volume totals €59.1m. opment, scheduled for completion next tail store in Munich. Last year, the firm heavy guns of the real estate industry shown evidence that they’ve been able ing a place to live that will be relatively The properties are all fully let on long spring, is located in Löhne, between Han- bought a logistics centre leased to car together, the content of the gathering to recover from serious problems with- free of crime, he confided, make sure you leases to established logistics tenants nover and Dortmund. ECE said it will re- manufacturer BMW near Munich for is about anything BUT real estate. Or out being damaged. live in a place where the Mafia is in control and extend to a total area of 131,000 main responsible for completing the three €44m on behalf of a private consortium at least, not directly. Many companies, countries and so- of the local vice mobs. That way criminals sqm. The properties are located in connected buildings which offer 100,000 of Arab investors. ECE has been devel- It’s about blue skies thinking, listen- cieties are hiding these vulnerabilities, can’t run riot and cause mayhem among Krefeld, Oberhausen and Neuss. sqm of logistics and 7,000 sqm of office oping retail and industrial real estate and ing to top-class speakers talking about without exposing them. You want to the citizenry. And it probably makes for Amar Latif, in charge of the German and social space. The firm aims to win other buildings since 1965. a variety of issues that affect us all in live in a society that thrives on volatility very agreeable living in Larchmont, New our business and private lives. Issues and stressers. Fragile systems don’t like York, where Taleb makes his home. that shape our existences, but are not shocks, randomness, variability, but an- That other great gaming theorist, reducible to yields, benchmarks, inter- tifragile systems need and thrive on con- Yanis Varoufakis, reminded us that nal rates of return, or any of the other trol stressers to profit from Black Swans. Greece is the canary in the mine, warn- key metrics of the professional real es- Taleb commented that Germany, ing that the recent euro crisis will shortly tate investment industry. with its very decentralised industrial raise its head again. Like other speakers, BASIC RETAIL EXPERTS FOR OVER 10 YEARS Instead, under the inspired lead- structure, showed many characteristics including London mayor Boris Johnson’s ership of Reinhard Einwaller and his of antifragility. Its industrial behemoths, adviser Gerard Lyons, he urged reform This year, GRR shall celebrate its 10th man food industry.Our experience has shown vacancy which can be elevated to higher pro- highly competent team, the event has instead of being fragile entities likely of European institutions now, before the anniversary, one of many reasons to in- that even specialty stores and retail centers perty value through renovation and targeted troduce the GRR in this column. GRR was require hands-on management and insight- re-letting (Value Added). blossomed into a warm, hospitable to be swept away by the next wave of British vote on Brexit, or else he fears founded in November 2005 and shortly ful owners who understand this commercial gathering of mainly Austrian real es- dotcom wizards, have often achieved they may really vote to leave the union. thereafter acquired its first portfolio con- segment and the resulting tenant require- In the last 3 years approximately 40 to 60 tate people, with a handful of Germans market eminence by understanding tri- Other talks from top experts covered sisting of 11 Netto Supermarkets. Thus ments. Within the framework of its “Locati- lease agreements were extended or newly making the trip across the Bavarian bor- al and error. topics as diverse as the New Jihadists, began the implementation of the idea of on Management” concept GRR creates and concluded annually, many after construction Mr. Klaus-Jürgen Sontowski to establish a operationally implements concrete marke- expansions or modernization. In such man- der. The guest speakers, on the other The pharmaceutical business, which urban agriculture and food distribuion, company having an exclusive focus on the ting concepts for specialty retail centers. As ner WALT remained constant in the portfolios hand, came from all around the world, has produced a number of German climate capitalism, the future of Berlin, sector „Basic Retail“, namely neighbor- neighborhood retailers customarily do not we manage. The GRR Group currently has 40 and many pleasingly stayed around for champions, is what he called an er- honesty in business, borderless eco- hood retailers always coupled with a food have budgets comparable to large shopping employees and manages approximately 300 the few days to talk with participants ror-loving business, in that many of the nomics, and the battle for God. Phew! retail anchor. centers, events and other promotions must Basic Retail properties nationally, having a to- be economically implemented. tal investment volume of circa 1 Billion Euros. and of course to attend other speaker great drug breakthroughs have come All this out-of-the-box thinking helped us In the following years the group successively We believe that we are well positioned to sessions - in addition to enjoying the about by accident while the scientists view our economic and real estate chal- built its own portfolio with an investment vo- Moreover, our Asset and Property Manage- meet the challenges of the future and excellent Austrian Gastfreundschaft or- were working towards another result. lenges in a fresh and invigorating light. At lume of approximately 320 Million Euros and ment team is attuned to tenant requirements. shall continue to specialize in the likewise invested in the management team We prioritize which measures and to what ex- ganised by our hosts. As each plane crash makes the next least for a few days. “Basic Retail“sector. required to successfully build the business. tent allow the desired potential for success. Philosopher and economic scien- plane crash less likely, antifragile sys- Now, back down from the mountains, The group has also successfully transacted More than half of the properties we manage tist Nassim Nicholas Taleb talked to tems never let a mistake go to waste. we can already feel the clammy hand of on behalf of third parties. belong to our own portfolio and to the spe- us about Antifragility, the subject of his The sinking of the Titanic taught us not to benchmarks, minimum yields and key cialized real estate funds which we have initiated, namely the GRR German Retail most recent book and a progression build larger ships, thus saving countless performance indicators jostling for our Our investment focus was geared towards Susanne Klaußner discount retailers, supermarkets and neigh- Funds No. 1 and No. 2. We manage further on his earlier bestsellers Fooled by lives from the next shipping disaster. It- attention. We’re glad of the new energy borhood and specialty retail centers. Through properties on behalf of third parties per ma- CEO GRR Group Randomness and The Black Swan. An- aly’s constant political manoevering and that will help us to deal with them. But such specialization in this asset class the nagement service arrangements. Emphasis is tifragility deals with the attributes that countless governments in the post war roll on ReComm in Kitzbühel next year! GRR Group was able to establish extensive also placed upon management of portfolios www.grr-group.de having short residual lease terms with high companies and individuals possess era have led in a perverse way to stabil- contacts with retail chain groups in the Ger- Charles Kingston, Editor 6 7 www.refire-online.com

drlübkekelber GERMAN REAL ESTATE

Meanwhile, the Hamburg-based Gar- important building block.” Patrizia’s could be deemed more than “necessary” be Logistic bought 11 industrial assets business model sees it acting as a improvements to their rented dwellings. from Munich developer Doblinger for co-investor and portfolio manager for A benchmark is being set which would its first corporate property Spezialfonds, insurance companies, pension funds, define ‘hardship’ as when a rent rise as which has €160m in equity commitments. sovereign wealth funds, and savings a result of improvements pushes the The portfolio generates annual rent- and cooperative banks. tenant beyond the barrier of 40% of his/ al income of €15m and has an average her net income for the ‘cold’ rent of the lease term of eight years. Assets are apartment i.e without ancillary charges. located in the Berlin, Munich, Cologne, Germany/Legislation The planned reforms are effectively Hamburg and Frankfurt regions. The Radical new reform package introducing the principle that only those fund Garbe Unternehmensimmobilien heads for government ratifi- upgrading investments made by land- Fonds 1 (GUNIF 1) equity commitments cation lords are permissible for cost purposes of over €160m are nearly fully invested that a reasonable landlord would pay for, with the acquisition of the portfolio, Gar- Investors in German residential housing “even if he had to bear the costs of them be said in a statement. need to be aware of potentially very sig- himself” – a tricky concept. According to CEO Christopher Gar- nificant changes to the tenancy laws that The Justice Ministry is justifying be, “The launch of this property invest- are making their way through Berlin’s the new package of measures on the ment product and the linked asset ac- Ministry of Justice and headed for rati- grounds that previous measures had not quisition is the natural next step in the fication by Germany’s Bundestag. been sufficient to prevent tenants los- development of our property platform in After succesfully passing legislation to ing their apartments after rent rises due the industrial and logistics sector,” cap permitted rents on housing (the ‘Mi- to improvements. The new laws are de- The firm plans further investment etpreisbremse’) and radically altering the signed to bring the interests of tenants products for institutional investors in the traditional form of broker compensation and landlords closer together even after sector. “Our property portfolio is grow- (the ‘Beststellerprinzip’), the German gov- the desired effects of modernisation. ing steadily and is worth over €400m at ernment is preparing a second wave of Axel Gedaschko, head of the housing the moment – and we have the option to reforms designed to counter profiteering owners association GdW, said the indus- place this over the next 12 months,” said in the housing market and to make hous- try was appalled at the new proposals. Garbe. The firm manages 60 assets in 52 ing more affordable for more people. “This totally endangers the whole mod- locations in three countries. The initial reaction from the housing ernising of our housing stock in Germany Bank financing for the deal was pro- industry in Germany has been, not sur- and the whole planned energy revolution vided by Stuttgart-based landesbank prisingly, outrage as the consequences (“Energiewende”), if the possibility of rais- LBBW. The fund was launched together of the proposed measures begins to ing rents after refurbishment is so hugely with servicer KVG Institutional Invest- sink in. limited by these new planned measures,” ment Partners; Frankfurt-based place- The two key clauses in the new pack- he said. Necessary investment in mod- ment specialist Selinus Capital was re- age of tougher measures are a) the re- ernisations would frequently make no sponsible for capital raising. duction from 11% to 8% of the amount economic sense, he said, while the com- And finally, the rapidly-growing Pa- of renovation costs that landlords will plete refurbishment of older obsolete trizia Immobilien from Augsburg, be allowed to pass on to their tenants, properties would be futile. which has been expanding throughout and b) the period of time used as a ref- Critical also for investors is the length Europe across all sectors to become a erence to determine the ‘fair rent’ for a of time deemed relevant for the purpose real fund powerhouse, also established neighbourhood is being increased from of defining a local ‘fair rent’. Increasing a new subsidiary in the Netherlands, the past four years to the past TEN years. this period to the last TEN years, in- exclusively focused on logistics deals Furthermore, a new secondary cap stead of the current FOUR years, means across Europe. on rents is being introduced. No rent will many more rental contracts from the According to founder and CEO Wolf- be permitted to rise by more than 50% past can be brought into the analysis of gang Egger, “The e-commerce market over an eight-year period, and under no a weighted average rent for a locality. is expanding rapidly, making logistics circumstances by more than €4.00 per These serve to determine the so-called properties all the more interesting for square metre. ‘Mietspiegel’ or ‘rent index’ for an area, investors, which is why we’ve expand- Tenants should be able to defend which serves as a benchmark for other ed our portfolio of services with this themselves better against anything that permissible rents in the area. 8 9 www.refire-online.com

Gedaschko’s organisation is high- passed into law, but tenants’ associations Europe/Acquisitions ly critical of this extending of the rele- and the left-of-centre SPD party seem to UK’s M7 bolsters expansion vant time period, as this would serve to have got the bit between their teeth in with major Dutch, German freeze rents at a lower level, given that trying to push this one through. acquisitions any improvements made to the property would be underweighted in the local rent The fast-growing UK-based M7, a spe- index, and would actually hinder further Germany/Acquisitions cialist investor and asset manager of improvements. “The rent index can’t be Corestate buys further €125m multi-let real estate across Europe, has used as a blunt instrument to dampen of retail, business as usual had a busy couple of months, closing on down rents,” he says, “but instead it fundraising on no less than three of its must be a tool to objectively reflect local Switzerland-based Corestate Capital funds in the month of October alone. market rent levels.” has shrugged off its recent aborted stock REFIRE caught up with Hugh Fras- market listing, cancelled due to “a diffi- er, director and head of debt at M7, on REFIRE: The ramifications of this new cult environment for IPOs in Germany’s the fringes of the recent Real Estate Fi- proposed legislation can scarcely be stock market”, to carry on with business nance Day, organised by the Frankfurt overstated, particularly in those German as usual in the buying and selling of real School Verlag and Targa Communica- cities where rents have risen strongly estate. tions. over the past few years. In other words, Its most recent foray was a €125m When we talked, M7 had just finished in the popular urban centres where there investment in Germany’s retail property inking the deal on a purchase of a port- are jobs and where people want to live. sector, buying a portfolio of regional as- folio of eight German retail properties The net effect will be a freezing of rents, sets in Germany’s mid-sized cities. for €46m which, it said, corresponds to or, in some cases, an actual reduction The portfolio of 20 single assets is a gross initial yield of 8.7%. The seller of the rent the landlord is permitted to in prime locations in pedestrian zones was a private owner. The portfolio, to charge on a new lease. of cities including Bremen, Düren and become part of the M7 European Real Greenman Should the legislation go through, Flensburg. Tenants of the 56,000 sqm Estate Investment Partners I Fund mortgage lending banks will immedi- portfolio include well-known retailers (EREIP I), has 38,350 sqm of gross ately revise their lending policy, which C&A, H&M, REWE and Saturn. lettable area and includes four super- heretofore has been based on steady Sascha Wilhelm, chief executive at markets, in Alfeld, Bad Gandersheim, but moderate rent increases. If this is Corestate, said the portfolio was a sta- Exertal and Hildesheim, three retail Investments no longer going to be the case, they will ble investment opportunity for the com- warehouse centres in Braunschweig, Greenman are sector specific investment fund managers. Our sole focus is the German food retailing re-assess the value of the asset against pany’s investors, who expect a regular, Gelsenkirchen and Lehrte and a shop- asset class, Fachmarktzentren. Greenman manage assets with a value of over €250m located across which they are lending, and will revise distributable cash-flow. “We are able to ping centre in Hannover. the value downwards. They will inev- achieve attractive risk-adjusted returns, M7 is taking over the asset manage- Germany. Our investment strategy delivers: itably adjust their loan-to-value lend- especially in comparison to similar in- ment of the portfolio through its on- • low finance & operational costs ing downwards, and may even look for vestments within Germany’s ‘Big Seven’ the-ground German team, managd by • high annual rent surpluses further equity from those to whom they cities,” he said. “We see high potential Alyssa Huse out of Frankfurt. The firm • twice annual investor distributions have already lent money. in this market and will continue to pursue now manages 32 properties in Germany The critical step of extending the ba- this strategy.” with total floor area of 383,000 sqm and • flexible investment structures sis for determining average rents back to At the beginning of November, Cor- a volume of around €200m. It plans to • conservative exit models a period of ten years will likely kill off at estate cancelled the IPO of its Luxem- expand the portfolio to nearly €290m by • operational transparency one fell swoop any further rent increases. bourg holding, scheduled for within days, the end of this year, and has a further This is more radical than what the origi- citing the market environment for small pipeline of €250-400m for 2016. www.greenman.com nal Mietpreisbremse envisaged, namely a and mid-cap IPOs which had “deterio- On financing, M7 secured €31m se- For more information about Greenman and our investment priorities please contact a member of our investor relations team dampening-down effect on rising rents. It rated considerably”. Since its establish- nior financing from Berlin Hyp for the in our Dublin office on +353 1 647 1121 | [email protected] represents pretty much a full-on assault men in 2006 by ex-Cerberus boss Ralph fund and Fraser said the group was Premier Benchmark Property LTD., t/a Greenman Investments is authorised as an Alternative Investment Fund Manager by the Central Bank of Ireland on the interests of residential landlords in Winter, the investment manager has discussing with the bank further financ- under the European Union (Alternative Investment Fund Managers) Regulations 2013. Authorisation number C123941. Germany’s most popular cities. transacted €5bn, almost all in Germany. ing for about 20 additional retail assets, Landlords are likely to be rushing to Winter remains the largest shareholder expected to close in early 2016. “This their lawyers to determine the legitimacy with 62%, along with Swiss company In- transaction underlines both the quality of these planned measures before they’re tershop which has a 28.1% share. of the fund’s portfolio and our ability to

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leverage our local teams’ relationships from three different vendors, comprise Germany/Retail real estate to access capital across Europe. The a total of 136,000 sqm of space, and Pramerica and QInvest buy 30 YEARS OF VALUE professionalism and expertise of the the combined purchase price was over 16-property German retail Berlin Hyp team allowed us to conclude €82m representing an initial yield of ap- portfolio this deal in a quick and efficient manner proximately 11%, with a vacancy rate CREATION IN REAL and we now look forward to building a of about 25%. The assets are located Pramerica Real Estate Investors and very strong relationship with the bank throughout the Netherlands and com- QInvest, Qatar’s leading investment over the coming years,“ said Fraser. prise a mixture of multi-let office, local bank, have bought a portfolio of 16 re- ESTATE Earlier in November, M7 raised over retail and light industrial property. tail properties located across Germany €40m of equity and loan notes for its A pan-European investor and asset through a newly formed joint venture. second mainland Europe fund, with in- manager specialised in multi-let real es- The seller is a joint venture of Hahn vestors include a US-based multi-strat- tate M7 Real Estate is a operates in UK, Group and Indigo Invest, but the terms egy private equity firm along with a Denmark, the Netherlands, France, Ger- of the deal were not disclosed. number of existing M7 investors. many, Portugal and Poland. Founded in The acquisition includes 16 multi- The fund, M7 European Real Estate 2009 and owned by senior managers, tenant retail assets anchored by major Investment Partners II (M7 EREIP II) M7 manages around €1.5bn of assets grocery and home improvement retail bought a portfolio of 42 assets in three and its joint venture partners include outlets, comprising more than 140,000 individual acquisitions, including the Oaktree Capital Management, Star- square meters across Germany. The Spring Portfolio that originated from wood Capital, H.I.G. Capital, Goldman shops, retail parks, home improvement a non-performing loan. The purchases, Sachs and M&G Investments. stores, and supermarkets in the portfolio

The largest Asset Management Provider by assets under management

aum 2014 total aum 2014 non-captive position AM-Provider in mill. € in mill. € 1 ECE Projektmanagement G.m.b.H. & Co. KG 18.300 12.810 2 CORPUS SIREO Investment & Asset Management GmbH 16.000 15.520 3 Bilfinger Real Estate Asset Management GmbH 14.134 14.134 4 PATRIZIA Immobilien AG 10.700 214 5 IC Asset Management GmbH 8.800 k.A. 6 Acrest Property Group GmbH 5.442 5.442 7 HIH Real Estate GmbH 4.400 4.400 8 POLARES Real Estate Asset Management GmbH 3.800 3.800 9 CR Investment Management GmbH 3.510 3.510 10 HAHN Fonds und Asset Management GmbH 2.400 240 11 Jones Lang LaSalle GmbH 2.100 2.100 With real estate assets under management of more than EUR 14 billion, the manager and partners majority 12 F&C REIT Asset Management GmbH & Co. KG 1.750 963 owned PATRIZIA is a leading European listed real estate investment company. We cover the entire value chain 13 Estama Gesellschaft für Real Estate mbH 1.720 1.393 14 Art-Invest Real Estate Management GmbH & Co. KG 1.640 262 from development and investment through asset- and portfolio management, adding value at each stage. What 15 BLUE Asset Management GmbH 1.425 1.425 sets us apart is the entrepreneurial culture of our circa 750 dedicated employees throughout Europe who live 16 BECKEN Holding GmbH 1.350 945 and breathe our core values – the basis of our long term client relationship – since 1984. 17 VÖLKEL COMPANY Asset Management GmbH & Co. KG 1.340 1.340 18 HGA Real Estate GmbH 1.200 1.110 www.patrizia.ag/rf ISIN DE000PAT1AG3 19 Garbe Logistic AG 1.100 495 20 Cordea Savills GmbH 1.061 605

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RZ_Anzeige_InstitRELetter_A4_en_01.indd 1 01.12.14 15:09 12 13 www.refire-online.com

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Flatow AdvisoryPartners

are located across North Rhine-West- QInvest. “We intend offering equity to our Germany/Mergers & Acquisitions phalia (5), Lower Saxony (4), Bavaria (3), shareholders and clients as part of our Vonovia gets green light for Saxony (2), Baden-Württemberg (1), and ongoing initiative to offer value add re- full-on Deutsche Wohnen bid Brandenburg (1). Anchor tenants include turns to all stakeholders.“ Rewe, Edeka, Kaufland, and Real. The Qatari group’s strategy is to invest Shareholders in Vonovia, Germany’s Hahn and Indigo had bought the opportunistically and ‘sector-agnostical- largest residential property company, package at the end of 2012 for around ly’ in junior financing and equity in the US gave their company the green light this €140m. Since then, the properties have and Europe in core, value-add and even week to go ahead with its bid for Germa- been modernized and newly rented greenfield developments. ny’s number 2 player Deutsche Wohnen within the framework of a “manage-to- Qinvest, whose shareholders include AG. Deutsche Wohnen is resisting the core” strategy. Pramerica will act as Qatar Islamic Bank, is an investment takeover, and last week itself signed a the portfolio and asset manager for the bank based in Qatar that describes itself deal to buy a €1.2bn property portfolio properties. as playing a “key role in from fellow-listed Patrizia Immobilien “The acquisition provides in- the Emirate’s international AG in a bid to prevent itself being swal- vestors with access to long-term investment plans.” lowed by its larger rival. income returns through strong un- Pramerica now man- Vonovia CEO Rolf Buch said Vo- derlying leases with major German ages more than €700m in novia would unveil a formal offer for retailers in proven, diversified, re- German retail property as- its takeover bid over the coming days. gional markets,“ said Sebastiano sets on behalf of investors. The vote of confidence from his share- Ferrante (pictured), head of Ger- Worldwide it manages holders came when they approved a THE UNIQUE OVERVIEW many for Pramerica (which itself is a $61.5bn of assets across share issue needed to finance the bid, unit of giant US insurer Prudential). the whole risk spectrum. On this latest valued at €9.9bn on a fully-diluted ba- FINANCING · MEZZANINE · EQUITY · CAPITAL MARKETS “The transaction provides us with German deal, Pramerica said it was an sis and €14bn including debt. A 75% higher yielding exposure with value add extension of its strategy to capitalise on quorum was required, and holders of a upside secured by defensive assets in strong performance in the basic needs more-than-sufficient 78.2% of Vonovia’s one of the more robust EU economies,“ sector in Europe, including grocery and capital voted in favour of the share issue. said154_RZ_ Craig Refire_125x87_Vs2_REAG Cowie, head of real estate 06.08.15 at 17:41home-improvement Seite 1 anchored projects. Agreement from at least 50% of Deut- sche Wohnen’s shareholders is required for the offer to be accepted. Deutsche Wohnen CEO Michael Zahn still main- tains that the Vonovia offer undervalues Professional Excellence his company and that the 50% thresh- old will not be reached. He described REAG is an independent consultancy specialising in real estate. Our professional team in Europe the offer as “unattractive and inade- provides services to national and international clients primarily in the following fields: quate” and urged his investors to vote to keep Deutsche Wohnen an indepen- • Appraisal (ImmoWertV, BelWertV, Red Book, IFRS) dent company. • Investment Advisory (Document DD/management, distressed portfolio consultancy) One of the key attractions to Vono- • Technical Services (Technical DD, Project Monitoring) via of acquiring Deutsche Wohnen is • Green Building (BREEAM, LEED) the latter’s strong foothold in the Ber- bauchundbrain.de • Environmental Due Diligence lin market, where the majority of its Messe Munich FAP-finance.com • Asset Management Support apartments are now located, following 5 - 7 October 2014 Represented in Berlin, Frankfurt, Hamburg, Bremen, a series of acquisitions of strong local Cologne and Munich, please call: Please visit us: players over the years. REAG GmbH Real Estate Advisory Group Germany Hall A1, Booth 231 Bockenheimer Landstraße 22, 60323 Frankfurt/Main In January next year, Deutsche For appointments please contact us Tel. +49(0)6924752670 Wohnen investors will have to decide AVAILABLE AT EXPOREAL by email > [email protected] [email protected] / www.reag-aa.com or phone > > > +49 30-844 159 490 whether to accept the offer of seven Vonovia shares and €83.14 in cash for Regulated by RICS every eleven Deutsche Wohnen shares they hold. Vonovia said earlier this

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...from page 14 ...... In Discussion with REFIRE

5 key pieces of advice for foreign inves- quently a lot less than the buyer might understand from his own Are you seeing many new buyer groups now? tors in German real estate previous experience or his home market. In fact, such an agree- ment is barely worth the paper it’s written on. Yes, we’re seeing a steady stream of new buyers from new markets. REFIRE sat down recently with Dr. Es- Asian buyers are now very strong, originally expats from Hong Kong month that this is its final offer. It has also said that it may fendiar Khorrami, founder and partner of For Anglo-Saxons, the LOI is a much firmer and Singapore, but now it’s mainland Chinese buyers. Also active are not go ahead with the deal if Deutsche Wohnen were to the Berlin law firm Bottermann Khorrami concept. But with the German notarial system, Israeli buyers, many of whom will look to team up with other Israelis buy ‘material assets’ in the meantime, which the €1.2bn of Rechtsanwälte, to dicuss ways in which an exclusivity agreement doesn’t mean any- experienced in the German market. And of course, many UK buyers, Patrizia apartments clearly is. Vonovia CEO Buch said his foreign investors can improve their busi- thing. You cannot force anyone to sell their bolstered by a strong currency which now goes a long way here. company was happy to continue with its bid as offered, irre- ness performance in Germany. It proved property, and the German system on claiming spective of the new holdings, which it described as “simply to be an enlightening discussion. damages is extremely restrictive, with the bur- The fourth key challenge is the area of construction. Many foregin in- an attempt at a defensive measure”. den of proof being heavily on the claimant to vestors are now moving away from the straightforward core investment For the Patrizia deal, Deutsche Wohnen said that half the REFIRE: What, in your view, are among the key demonstrate his actual losses. This would like- process of just buying a core asset and holding. They’re now looking financing would come from its existing liquidity, with the factors that determine the success of foreign in- ly involve a long court battle, nine months to a at core plus, they’re looking to enhance the asset. These are things they other half coming from bank loans. It said the deal would vestors in this German market? year from today, with an uncertain outcome. know well from home. This means dealing with architects and local close “in the coming months.” building contractors here in Germany, which can be tricky. Underlying the latest takeover bid, after nearly two years Dr. Khorrami: One key element, in today’s market, is the TIM- We need to frequently warn our clients that the LOI he’s clutch- of frenetic deal-making, capital-raising, and mergers and ING of a transaction. Investors always underestimate the time it ing in his hand is no guarantee that he’s got a full four weeks Here in Germany the architectural legal environment is more complex acquisitions in the residential sector, are rising property val- takes to get things done. It’s always a lot longer than they ex- or whatever with no danger of the vendor talking to anybody than in other countries. Despite submitting a fee proposal, an archi- ues, rising rents and ongoing domestic and international in- pect. Those who succeed keep a very close eye on timing and else.The potential buyer needs to really understand that time tect’s fees can explode if unforeseen elements arise in the proposed vestor appetite for exposure to the sector. monitor the work of their advisors or consultants much closer. is of the essence, and so assumed expectations of being able conversion or refurbishment. If materials increase in price during a Vonovia owns and manages 370,000 residential units to extend the LOI for an extra week or two are frequently mis- job, or rotten beams are discovered which weren’t spotted on the first across Germany, following its takeover of its erstwhile larg- Maybe it’s a German thing, but I think we often respond better placed. The consequences of breaching this LOI are just totally examination, then the architect’s fees can easily move up in tandem. est rival Gagfah in January this year. Deutsche Wohnen after a face-to face meeting, rather than just correspondence different in other jurisdictions, much more punitive. It’s difficult for an investor to complete his financial due diligence if he owns 147,000 apartments, the majority of which are in with email. So don’t just rely on the phone or mail. Be here. doesn’t know what his final costs are going to be. Addressing these Berlin. Together a merged entity of the two would generate Other buyers, such as the French, are more familiar with our issues early is vital to avoid being caught out afterwards. more than €2bn a year in rent-roll, and would have a market Foreign investors, medium sized companies, family offices system because of their own Napoleonic legal tradition, and capitalisation of more than €20bn, placing it just behind the or high net worth individuals often have structures that they they’re familiar with the need for notaries. But countries such Some of our experienced clients are therefore hiring their own local ar- Franco-Dutch group Unibail-Rodamco among the largest would like for investment purposes - offshore entities or trusts, as Ireland, the UK and the US are more used to just exchanging chitects and keeping them on the payroll to look after all their German European property companies. etc. This can cause problems because such trusts are not rec- contracts among lawyers, lawyer to lawyer – you don’t need a interests. They’ll work 40 hours a week troubleshooting all sorts of ognised in Germany as a legal entity, in contrast to other juris- notary, except for very specific functions. You CAN claim dam- areas and nipping problems in the bud. That way the investor stays on REFIRE: A number of commentators have suggested dictions such as the US or the UK. ages here, but it’s cumbersome and mostly doesn’t work top of thing and avoids nasty surprises. that the deal between Deutsche Wohnen and Patrizia for about 13,500 apartments, mainly located in Berlin and Kiel, This can set investors back a month or more, late in the pro- The third barrier to success here is frequently language. The The fifth challenge is finance. Finance is widely available in the German might nonetheless force Vonovia to go back and revise the cess, while a way is found around the problem of ownership by best investors from abroad are not lured into a false comfort market at the moment. Banks are still eager to lend, as long as the deal premise of its offer, and might even kill off the takeover bid an Isle of Man or Cayman Island trust, for example. zone by the fact that practically everybody speaks English in is not over-geared. The timing to get to a binding term-sheet is, howev- if it ultimately refused to increase its offer terms to Deutsche Germany. For many Germans who speak otherwise very good er, still very long. As always, investors have better chances if they have Wohnen shareholders. As many of these shareholders hold No German bank will give a loan to such a trust, because it English, the ability to express very nuanced aspects may be the financing capacity to sign the deals in advance of having specific fi- stakes in both firms, their interests may be divided and they doesn’t exist as a legal entity and cannot be registered on the beyond them, and they may omit to explain or express some nancing for the asset, and can afford to resolve the financing issue later. may switch loyalties if the numbers really don’t add up. land registry. Either you bring the trustee here to sign the con- element that might prove to be material for the buyer. tract in his individual name - which is highly unlikely - or you So, get either lawyers or financing advisors involved from an early stage take steps to set up a German or other entity which is funded So, get mother-tongue professional assistance from the very to bring in a number of offers, which can keep investors’ options open. Germany/Residential by the trust. This can lead to lengthy delays, where investors beginning of any transaction, and you’ll get a more profound Don’t assume that because you’ve talked with their branch office else- Grainger accelerates German exit with could lose out to competitors. understanding of what might turn out to be issues in a deal. where that you’re going to get the financing from that bank for that sale of JV with Heitman specific asset in Germany. It might not fit with the bank’s local structure, This happens very frequently, including with UK investors, who, These days, nearly ten years on from the boom years, even risk strategy or lending profile when you come to talk to them here. The UK-listed residential property investor Grainger plc after all, are European and are not necessarily expecting any newer entrants to the German market ar pretty well aware of and its partner Heitman from the US have sold their joint hitches like this. The American have had their own problems the mechanics of the actual real estate deal in Germany, in The foreign banks have pretty much all withdrawn from local lending venture German housing portfolio (MH Grainger JV Sarl) in recent years with their own IRS, and so are now somewhat terms of the asset category, the asset itself, due diligence, and in Germany. Many are still registered here but are not active. We to the giant housing group Vonovia (ex-Deutsche An- sensitised to possible problems with offshore havens. the financing. In my view, and in our day-to-day experience, recently got a loan offer for €10m at 1.45% over seven years on a nington) for €136m. much the trickier area is the approach to the transaction itself, 52% gearing– there’s no way a foreign bank could come into this The sale of the portfolio of 2,500 units represents a further The second key area of misunderstanding relates to the LOI or which requires a specialised knowledge and well-tuned listen- market right now with all their additional costs, and be competitive step towards Grainger’s exit from the German market, after it Letter of Intent. In effect, these mean very little in Germany – fre- ing skills to get from the starting point to completion. with that. So start talking financing with local sources very early. put its own solely-owned assets on the market in September. According to outgoing CEO Andrew Cunningham, 16 17 www.refire-online.com

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the timing is opportune for Grainger. ture is 42%. The sale is expected to be nance its debt and seek a takeover by an year ago. Gross net asset value per share cy was at 12.5%, and average rents at “Having taken advantage of the strong final by year’s end. institutional investor. Grainger’s shares rose 9.7% to £3.19. €5.30per sqm per month. Grand City investor appetite forGerman residential In 2012 Grainger sold the Chica- have long traded at a discount to their Grainger was in the headlines in the also reported equity doubling to €2bn, assets, this transaction is evidence of go-based Heitman 75% of its then net asset value, in contrast to most of UK recently for becoming the first FTSE taking the equity ratio to 44% from 40% further progress in our objective to sim- 3,000-unit German portfolio valued at their listed peers in London, which trade company to appoint women to its three at year-end 2014. The firm raised €1.2bn plify the business, enabling Grainger to €232m, including outstanding debt. The at a premium. most important board positions, with through several bond, equity and perpet- focus resources on its core competen- properties are nealy all based in western Crystal Amber was quoted as say- new CEO Helen Gordon succeed- ual hybrid note issues over the first three cies and recycle capital into growing our Germany. ing it believes there is hidden value on ing Cunningham next month, Vanessa quarters, and had €609m of liquidity UK private rented sector portfolio.” In March the company reported it had Grainger’s balance sheet because of its Simms taking on the role of finance di- available for investment. EPRA net asset For the Newcastle-headquartered 2,814 managed, market-rent units, val- ownership of properties valued at below rector, under the supervision of the com- ratio is 41.8%, and its net asset value is value rose to €1.94bn from €1.44bn at Grainger, which is the UK’s largest pri- ued at €197m, in Germany. These are up their open market sale price. Grainger pany’s chairman Baroness Ford. €20.54, while the share price is trading the end of last year. vate landlord, the sale of its 25% stake for sale, along now with the units in the owns £1.5bn of rent-controlled homes in at about €24.70. (The company listed “We have exceeded our internal tar- in the JV will result in about €48m gross JV with Heitman. the UK, and a further £1.1bn of homes at €20.00 in July, generating€200m for gets,” commented CEO Christian Wind- including performance-related compen- Recent reports from the UK suggest- rented at market rates, many of which Germany/Listed Companies the company). The Tel Aviv-listed Ado fuhr. “With abundant firepower and a sation, and the group estimates the ex- ed that activist investor Crystal Amber, are in London and the southeast, where ADO Properties sees doubling Group remains a 40.7% shareholder in strong operational platform, we enter pected pre-tax earnings to be €16mn. a Guernsey-based fund with a record property prices have risen strongly. of FFO after acquisition spree the German group. into the final quarter of the year from a Grainger has been the asset manager of of targeting small-cap companies and In its full year results to end-Septem- good standing point and with the expec- the portfolio for the JV. They also state which holds a 3.2% stake in Grainger, ber, Grainger reported recurring profit of Four months after its stock exchange tation for a successful year.” that the IRR for the four-year joint ven- has been pressurising the group to refi- sterling £41.2m , down from £47.1m a public listing, the Berlin-based housing Germany/Listed Properties investor ADO Properties presented its Listed Grand City Properties figures for the first nine months showing boosts profit, FFO Germany/Retail real estate a doubling of funds from operations FFO Ireland’s Greenman adds to €22m after its recent acquisitions, and Fast-growing German listed housing firm €26m centre to retail fund indicated that it had signed deals on a Grand City Properties posted a nine further €150m which would be conclud- month increase of 65% in both net prof- Ireland’s Greenman Investments has ed before year end. it, to €286m, and funds from operations bought the StadtGalerie in Datteln, North The company, which invests exclu- FFO, to €88m, boosted by strong portfo- Rhine-Westphalia, for its “Greenman Re- sively in Berlin housing, has increased lio growth and lower financing costs. tail+” fund, in a share deal. The deal is its average in-place rent per month to The company recently bought sev- the third this year for the aquisitive Dub- €5.75/sqm, reflecting an average annual eral new residential portfolios totalling lin-based fund manager, which is special- YOUR GATEWAY TO GERMAN REAL ESTATE rental growth of 6.5% on a like-for-like about 5,000 units throughout North ised on the German Fachmarktzentren, re- basis. The vacancy rate dropped 3%, Rhine-Westphalia. The transactions tail parks and hybrid centre market. MORE THAN 15 YEARS TRACK RECORD IN HIGH YIELD REAL ESTATE INVESTMENTS IN GERMANY like-for-like, and currently stands at 4%. came to €170m, with the portfolios gen- The investment volume for the 10,000 BORIS HARDI PRINCIPAL CONSULTING OFFERS: The bottom line shows pre-tax earnings erating annual rents of €15m. The port- sqm of rental space in the hybrid shop- of €15.3m (Q1-3, 2014: €9.9mn). folios have a 15% vacancy rate, which ping center amounts to €26.4m. The cen- According to CEO Rabin Savion (pic- suggests sizeable upside potential for ter has 20 tenants - anchored by grocer • Market-insight and deal-fronting for international buyers in Germany tured, right), “We can confirm our FFO Grand City, which specialises on such Rewe with 24% of the floor space, fol- • Commercial real estate sales in Germany guidance of €30m for the financial year turnaround opportunities. lowed by C&A with 15%. The property • International landlord representation in Germany 2015. Including the new acquisitions we The Luxembourg-headquartered was sold by a joint venture of Concepta are expecting to close in 2015, we expect company has grown its portfolio to Projectentwicklung and Black Horse • Identifi cation, asset underwriting and management of asset managers an annualised FFO run-rate of €39m… 76,000 residential units valued at Development (both from Düsseldorf). • Forward-deals and off-market acquistions for foreign investors After our IPO we promised further growth €3.77bn, up from 43,000 units at end- Hybrid centres range in size between Fachmarktzentren • Commercial real estate offerings of single assets of our portfolio and since then we have 2014. “The newly acquired properties specialist retail parks (“ ”) signed five acquisitions adding more than make a large contribution to the diver- and larger retail centres. They are typical- >20 Mio. Euros and portfolios >100 Mio. Euros 1,200 units to our portfolio which will posi- sification and quality of the portfolio ly anchored by a large food retailer, and • Client representation at banks‘ and real estate institutions‘ senior level tively influence our results from next year.” while maintaining high upside potential cover the entire range of food, near food, At the end of September, ADO Prop- in terms of rent, occupancy and efficien- and non-food needs. Centrally located in erties owned 14,600 apartments in the cy improvements,” said Grand City in a small and medium-sized towns they cater www.bhpere.com capital valued at €1.2bn, up from 6,600 press statement. for demand from the surrounding areas at the end of 2014. The company’s LTV At end September portfolio vacan- not served by large shopping centres. 18 19 www.refire-online.com

Datteln has about a portfolio of around event real estate event focuses on the The German document efficient and productive ne- division of Baker Tilly Roelfs. The most 34,000 inhabitants and is €279 million compris- opportunities and challenges facing the uses the same basic struc- gotiation of documentation.“ potential is seen for funds concentrating near to the city of Dort- ing of 50 assets with German real estate finance market. ture and “boilerplate“ as the “The new German REF on the tranches between 60% and 100% mund. The Stadgalerie a total rental space of Apart from a wide-ranging programme LMA recommended form of Document demonstrates of the LTV ratio. Datteln is in the heart of some 181,000 sqm of presentations and panel discussions, facility agreement for the our commitment to ex- The TPW study concludes that the town on its busy Neu- throughout Germany. the LMA launched its new German law German law investment panding our documenta- tranches below 60% of LTV, the senior markt Square, which Greenman CEO real estate finance document – a new rec- grade market or, where relevant, the En- tion library in the real estate sector and tranches, are only of marginal interest for and co-founder John Wilkinson de- ommended form of euro currency term glish law real estate finance documenta- is representative of the LMA’s increased debt fund providers, as the interest rates scribes as a major benefit of the prop- Germany/Financing facility agreement under German law, tion. It was put together and agreed by activity in this area of the market. Fol- at this level are simply too low; the yield erty. LMA launches German sin- intended for use in real estate finance an experienced working party, consisting lowing a significant rise in both overseas perspective for investors buying in at that In a separate joint venture deal earlier gle currency document for multi-property investment transactions of representatives from major German and non-bank investment in the German level are unattractive. in April this year, Greenman bought 29 transactions to be documented under German law. and international banks (including Pfand- commercial real estate market, we hope At 60% to 80% there is less lending EDEKA stores with a volume of €95m The documentation project was be- brief banks) and German law firms. The that the document will contribute to at- available, with many of the tradition- for one of its funds. In that transaction, The Loan Market Association (LMA) gun in response to demand from German document also sets out drafting options tracting new entrants to the market.“ al lending banks much more reticent to as in this latest deal, Greenman was ad- gathered for the second year in a row participants for a German law governed to determine suitability of the facility for lend due to their Basel III commitments. vised for the sale by Berlin law firmBot - in Munich on 24th November for its Mu- form of real estate investment facility registration in a Pfandbrief bank’s cover However, here is where there is a lot of termann Khorrami. nich Real Estate Finance Conference, agreement for the German real estate register (Deckungsregister). Germany/Financing demand, and because of the higher risk Greenman, which was set up in 2005, attended by over 180 finance profes- finance market (including the German Commenting on the document, Clare More debt funds expected at this level, yields are also higher than structures funds under its Luxembourg sionals. Pfandbrief market), in much the same Dawson, LMA chief executive, said: “Real in the 60-80% LTV space with senior tranches. SICAV platform for Irish private wealth Among the LMA’s key objectives is way as the LMA provided facility agree- estate finance forms a significant part of According to Martina Hertwig, a part- investors and European institutional in- the promotion of syndicated loan prod- ments for the real estate finance markets the syndicated loan market and is a key The loosening of the regulatory frame- ner at TPW in Hamburg, “We estimate vestors. The company currently manages ucts in the EMEA region, and its Munich in England and Wales and Scotland. contributor to economic growth. The LMA work since May of this year by Germa- that fund investors – depending on their remains committed both to fostering REF ny’s financial watchdog BaFin has led risk tolerance – can achieve IRRs of be- liquidity and assisting its members who to a growing interest among investors tween 8% and 15%. Debt funds here in are active in the market. We hope that in both setting up and availing of debt Germany are not really competing direct- the addition of a German law real estate funds as an alternative source of real ly with the banks, but rather are a com- finance facility agreement to our existing estate financing, according to the Ham- plimentary vehicle to bank financing, and suite of REF documents will lead to more burg-based consultancy group TPW, a help to fill in the gaps that have emerged

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...from page 17 KRIEGER R EAL ESTATE M ANAGEMENT

AUDITOR· TAX A DVISOR· ATTORNEY on the financing landscape since Basel about half that. there were already 53 funds set up here the first half of 2015 thanks to property revaluation gains, but FRANKFURT AM MAIN · LAMPERTHEIM · BERLIN III. We’re expecting to see more debt Previous BaFin regulations had made in June 2015, of which nine were set up its like-for-like profit also improved amid good demand for its funds and banks working together, with it complicated for investors to access the in the first half of this year alone. These workspace. maybe the bank taking on the senior market for debt funds, but these have 53 funds are targeting total capital in- Pretax profit for the company, including gains made on the tranche and the debt fund taking the been considerably loosened since May. vestment of €33.8bn.” revaluation of the property in its portfolio, rose to €28.3 million tranche at 60% to 80% of the LTV. Debt funds can now make fresh loans, in the six months to the end of September from €15.3 million There are a number of arguments restructure, or prolong existing loans far a year earlier. Like-for-like recurring profit for the group, how- in favour of institutional investors get- more easily. Germany/Industrial Real Estate ever, also rise, up to €6.9 million from €5.1 million amid good ting into debt funds, says TPW. Among Aykut Bussian, head of fund solu- Sirius Real Estate profit up on demand for its properties. them are the huge number of investors tions at TPW, says “Because of these strong workspace demand Sirius said its like-for-like gross annual rent roll rose to looking for acceptable yields. For in- changes we can now really expect that €50.1 million in the half from €50.0 million, as strong demand surers, there are benefits of investing in debt funds are likely to play a more sig- We’ve been keeping a watchful eye on for its workspace helped offset a higher-than-usual number of debt funds rather than holding real es- nificant role in future. We’ve already seen the improving AIM-listed Sirius Real Es- tenant moves in the period. tate directly, as a result of the Solvency how in other countries – particularly in tate, which owns and operates self-stor- The total valuation of the company’s portfolio rose to II legislation. While investments in real the USA – this has already happened. age facilities, business parks, industrial €615.2 million from €550.0 million in the half, while the com- estate held directly require 25% equity Numerous new funds have come to Eu- complexes and offices across Germany. pany’s net asset value per share increased 5.5% to €50.13 as capital, they can invest in debt funds for rope since 2013 – according to Scope The company said its pretax profit rose in of Sept. 30, compared to €47.51 at the end of March. Sept. 30 marks the first six months of its 2016 fiscal year. The company Guest Column: is paying an interim dividend of 0.92 cents per share. Prof. Dr. Alexander von Erdély, Managing Director, VALTEQ Gesellschaft mbH In its recent statement, Sirius said it is rolling out a capi- Untapped potential tal-expenditure program to increase the amount of leasable storage space across its real estate portfolio. The company’s In times of low interest rates and another enormous amount, as many Smartspace offering includes self-storage and office space continual high demand in the medium-sized enterprises also own targeted primarily at small businesses. metropolitan regions, it is becoming the real estate the companies use. “The most significant element of our capex investment ever more difficult for investors to The upkeep of their own real estate initiatives is the transformation of difficult space into our find investment opportunities that does not pay off for many over the Smartspace products,” CEO Andrew Coombs told ana- offer a good balance of security and long term – in the worst case, a loss lysts during a conference call. Rentable space under the yield. When supply becomes scarce is generated. This is primarily down Smartspace service begins at 4 sqm. and yields are falling, there are not to a lack of expertise with respect to www.valteq.de many options available. However, the optimisation of operating costs As of Sept. 30, the company had converted 74,235 square investors should not forget that many in the wider sense. There is often a meters, or 6.7% of leasable space, across the company’s investment opportunities remain need for optimisation over the entire holdings into rentable Smartspace. “We would expect this to untapped. life-cycle of a property; from energy- while the company enjoys the benefit increase to closer to 8% after the completion of the capex savings potential, through spatial of reduced costs for its business investment initiatives,” Coombs said. A study conducted by CBRE, optimisation, and right up to ongoing space. Furthermore, investors have Demand for office space by small businesses and VALTEQ’s parent company, revealed operation. the huge advantage of not being self-storage from commercial and residential tenants is rising that substantial savings potential restricted to just prime locations across Germany. Coombs indicated facilities converted to exists just in the real estate managed So, why am I telling you all this? when searching for profitable real Smartspace office and storage has exceeded €9 per square by German DAX 30 companies alone. Because the potential that lurks estate opportunities. In terms of meter in its core markets. “The demand for both these offer- How substantial? Almost 30 billion behind these matters is one which how its companies are distributed, ings is very pleasing, and generally, 12 months after the space Euro, if one also includes the operative is of great interest for companies, Germany is a very heterogeneous costs that buildings give rise to. In this investors and service providers, such nation. Many of the global market becomes ready to let, we are consistently seeing these be- regard, the 30 billion Euro accounted as VALTEQ. Investors can attempt leaders are not based in major come more than 90% occupied in our core locations,” he said. for by DAX companies are by no to make targeted approaches to centres, such as Berlin or Frankfurt, Sirius Real Estate operates a diversified property portfo- means the end of the story. Germany companies and to invest in their real but rather in small and medium-sized lio across Germany with more than 1 million sqm of leasable is a country shaped by its medium- estate assets. In the ideal scenario, centres with good infrastructure. It space. The company specializes in business parks but also sized enterprises, which account both parties benefit from investments is this which also makes investment offers portable-storage containers, flex office and ware- for the lion’s share of the domestic of this kind. The investor can take in regional space interesting. So be house-storage space as well as more traditional office and net product. The savings potential satisfaction from the secure cash flow courageous and bank on the German self-storage services through Sirius Facilities GmbH. Sirius available here is likely to be yet brought about by a solvent tenant, mid-sized sector. Facilities operates 38 commercial locations, along with its pri- mary self-storage product Smartspace.

Sponsored Statement 22 23 www.refire-online.com

A BOOMING MARKET SEGMENT: 100 NEW MEDICAL SERVICE CENTRES CREATED ANNUALLY

CORPUS SIREO expects rapid legislation which allowed for their growth in this market segment of creation. This growth trend is expec- healthcare real estate, creating ted to continue in the wake of the benefits, whilst patients benefit from investment volume for this type of established, with capital partners, its challenges for both project develo- 2012 Supply Structure Act (VStG). direct contact to an array of specialist property can range from €5 – €30mn, own managed MoB fund with a view pers and asset managers alike. There is also a defined upward trend physicians and healthcare professio- which creates a need to arrogate and to capture the value growth in this nals within a single entity. manage the assets on a regional, sub exciting healthcare sector. in the scale and networking intensity regional basis, ensuring economies of Medical Office Buildings (MOBs), within the existing MVZ segment, in MOBs: Continued rise in demand scale and ability to attract institutio- the properties housing the new medi- particular when they are co-sponso- nal capital into the sector. Contact: cal centres, represent a growth driven red by a hospital organization. The properties housing MVZs are segment in Germany’s real estate referred to as “medical office buil- The current project developers CORPUS SIREO market, assisted by the emergence MVZ: A growing tenant base Author: dings” (MOB). The current rise in constructing MOBs still tend to be International S. à r. l. of a new and dynamic tenant base demand for these assets is forecast to regional or city focused, meaning an 4a rue Albert Borschette Douglas Edwards – the “Medizinische Versorgungs- Managing Director What sets MVZs apart from the continue to expand: investor has to be able to reach across Plateau de Kirchberg zentren” (MVZ). Between 2006 and traditional medical centers (“Ärzte- CORPUS SIREO – given Germany’s demographic a number of markets to facilitate 1246 Luxembourg Asset Management Commercial GmbH 2012, the development and growth of häuser”) and medical service centres trend, a wider investment strategy in the MVZs, assisted by proactive legisla- (“Gesundheitszentren”) is mainly – the Governmental drive for enhan- sector. The fact that the MVZs are Douglas Edwards tion, tripled in number, climbing to their organizational and legal form. ced cost efficiencies in the ambula- rooted in their local communities, Managing Director around 2,000, whilst the number of In the former two types, physicians tory healthcare sector, and the MOBs housing them tend [email protected] physicians employed in these facili- rent out office space in their own – as well as the sector’s medical to let space to them on leases as ties doubled to an average of six per right. Resident physicians operating professionals wishing to establish long as 15, or even 20 years, makes For further information go to MVZ during the same period of time. within an MVZ, are by contrast, interdisciplinary practices to enhan- investment in this real estate seg- www.corpussireo.com CORPUS SIREO expects a long- jointly organized in a private limi- ce service offerings. ment highly interesting for safety- term annual completion rate of circa ted company (GmbH) or a private conscious, income driven, investors. 100 new MVZs, which will continue partnership (GbR). An MVZ is able The above changing dynamics re- The US market has seen the strongest to drive demand for the development to be a multi-disciplined organization presents a real challenge for project development by far in this field of of new MOBs. having within its operating structure developers and asset managers alike, healthcare real estate, with numerous a variety of healthcare professionals, due to the specials requirements asso- listed REITs and institutions opera- Recent publications by the German other than just physicians, all of ciated with purpose-built properties ting within the MoB sector. National Association of Statutory whom seek are able to offer patients of this type. Health Insurance Physicians (KBV) with their ambulatory care needs. Having been active in the “health- An MOB typically accommodates care real estate” segment for many substantiated the sustained growth of MVZs are frequently operated by 10 – 25 tenants on a net lettable area years with its own institutional the MVZ segment. Totaling around hospitals, the idea being to expand of 3,000 to 5,000 square meters. The funds, CORPUS SIREO has recently 2,000 facilities by the end of 2012, their service spectrum. These coope- their number increased several fold rative business models generate or- since the introduction of the 2004 ganizational and financial synergistic

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

from page 21

Germany/Research The previous strongest Q3 was in 2013 Germany/Study with the low interest rate environment, has asset classes such as stocks or bonds. One driver of performance in Q3 2015 was the Cash flow into German with only €0.6bn. Insurers need to raise real changed investment strategies among in- reason for that is the base data used for Sol- capital growth component, which was funds, listed companies at Over the first three quarters of this estate quota to over 10% - surers, which previously focused on buying vency II, which only looks at the UK market; 1.45% compared with a modest 0.82% record levels year, equity placements – including IPOs study government bonds. Even though high eq- another is the fact that the low correlation for income return. and capital raisings of all kinds - came uity provisions are required for alternative between property and other asset classes The slowdown in Q3 performance was The flow of money into German listed to €5.8bn, already exceeding by 25% the It makes sense for most insurance com- assets such as property, investments in the has not been sufficiently considered.” seen across both core and value added and non-listed indirect real estate in- full-year 2014. panies to take on a greater degree of sector are indispensable, the study says. funds. Performance of core funds de- vestments over the first nine months Although €310m of equity has already exposure to real estate despite the in- According to Professor Tobias Just, creased slightly to 2.16% for the quarter was €13.9bn, an increase of 42% year been placed in Q4, Barkow said he ex- troduction of the Solvency II regulations the head of the IREBS which is part of the Europe/Study compared with 2.35% previously, while on year, according to a new report from pects much less activity than in the pre- concerning equity capital, concludes a University of Regensburg, “Our study an- Performance in European value added funds returned 3.12% for Q3 capital markets advisory Barkow Con- vious three quarters because of a more recent study jointly carried out by IREBS alysed yield opportunities and risk assess- non-listed funds slows in Q3 2015, down from 4.50% previously. sulting. This is the highest amount since challenging IPO environment. and private group Corestate Capital. ment across the different asset classes for - INREV Conversely positive performance can the onset of the financial crisis. In the open-ended funds sector, nine- The study looked at property allocation the entire European property market, with a be explained in part by the performance According to CEO Peter Barkow, “In- month net inflows amounted to €2.6bn, a among European insurers and found that view to portfolio optimisation for insurers.” European non-listed real estate funds of Dutch funds, which achieved returns of direct capital flows are up for a post-crisis rise of 49% year on year, despite the large yields are attractive and risk is relatively An efficient portfolio needs a proper- continue to deliver positive performance 3.24% for Q3 compared to 1.51% for Q2 record year compensating for the weak number of German open-ended funds low for both direct and indirect real estate ty quota of over 10%, he said, while the in the third quarter of 2015 albeit at a 2015. This is largely attributable to strong closed-end funds market. The previous currently being wound up. “Public OEFs investment. The stable, long-term rental current sector average ranges only be- slower pace than the previous quarter, positive performance from funds invest- post-crisis record was in 2013 with in- continue their turnaround with inflows yield and value growth potential, in par- tween 4%-6% at the moment. In Germa- according to the results of the INREV ing in the residential sector. The positive flows of €17.3bn. for the first nine months slightly exceed- ticular, make the asset class attractive, ny, several insurers with very large capital Quarterly Index for Q3 2015. momentum was echoed in Germany, The third quarter saw inflows into Ger- ing average post-crisis inflows of €2.4bn. concludes the study. bases have investment exposure to real The index returned 2.27% in Q3 2015 where funds returned 1.93% up from man listed companies of €1.1bn in equity Nonetheless, reaching pre-crisis levels of The introduction of the Solvency II reg- estate of often as low as 0% and 2%, the compared with 2.60% in Q2 2015. On an 1.07% in Q2. Meanwhile the UK market placements. Barkow says Q3 is usually up to €22bn annually still seems an un- ulation was designed to improve invest- study shows. annualised four quarters rolling return ba- delivered a return of 2.74% for Q3 2015, heavily depressed by the holiday season. likely scenario at present,” said Barkow. ment risks. But the regulation, combined Corestate Capital’s CEO Sascha Wil- sis performance for non-listed funds was compared with 3.38% previously. helm commented, “Solvency II is distorting 9.37%, which is among the highest in Southern European funds delivered risks. Investments into property are as- the history of the INREV Quarterly Index 6.60% in Q3 2015, a big pick up com- sessed as too high-risk compared to other since its inception in Q1 2010. The main pared to the 2.74% seen in Q2 2015.

PAMERA is now CORNERSTONE Real Estate Advisers

We are your competent contact – and now worldwide Christoph Wittkop Cornerstone Real Estate Advisers Managing Director Country Head » One of the largest global real estate investment Germany managers [email protected] » Over 44 bn Euro of assets under management, including 3.1 bn Euro in Europe1 » 215 institutional investors and clients1 Gunther Deutsch » Strong local presence, with offices in the USA, Europe Managing Director Europe and Asia London Head of Investment Amsterdam [email protected] » Offices, Retail, Residential, Hotel and Light Rotterdam United States Industrial Stockholm Berlin 8 offices Helsinki Dusseldorf » Core and Value-Add strategies (Funds, Matthias Gerloff Separate Accounts, Financing) Milan Frankfurt Asia Paris (from the end of 2015) Hamburg Tokyo Managing Director » A member of the MassMutual Financial Group Madrid (from the end of 2015) Munich Hong Kong Head of Institutional Investment Solutions 1 As at 31 March 2015 [email protected]

Berlin . Dusseldorf . Frankfurt . Hamburg . Munich www.cornerstoneadvisers.de 26 27 www.refire-online.com

...from page 26

Western European funds performed Germany/Study The forecasts for vacancy reduction said yields are being driv- its effect on yields. Frankfurt’s financial district. 2.53% for this quarter, compared to German office yields sinking are also more favorable, especially for en lower by huge capital Of the other large German cit- During 2003-2005 under the plan- 2.68% previously. With a total return of faster than expected Munich and Frankfurt. In Munich, a fall inflows – both from Eu- ies, Düsseldorf gained 2.7%, ning of KSP Architects, the tower was 3.57%, industrial / logistics was the best of 100 bps is expected from a gross 6% ropean direct investors Hamburg 2.5%, Munich 2.3% and stripped back to its concrete skeleton performing sector for Q3 2015, followed Market expectations for peak yields in vacancy rate, so that the city could then and foreign buyers work- Frankfurt only 1%. There may yet and contemporary building services by residential at 3.48%, office at 2.58% German office property are being pro- effectively proclaim “full occupancy.” ing with managers. JLL is be higher growth in the other cit- were fitted, a new glass façade and in- and retail at 1.94%. gressively corrected downwards, and Prime rents remain stable in 2015, forecasting €55bn of deals ies over the last quarter, however, terior fittings were installed. When it re- Commenting on the key take-home are set to breach record lows next year, apart from Berlin, where experts fore- in Germany this year, said Kemper, due to the still-low opened in 2006, Garden Tower qualified message of the third-quarter figures, according to a new study by the Ger- cast a 3% increase and another 1.2% which would surpass the financing costs, which could bring for a “Very Good” BREEAM green build- INREV’s director of research Henri man Society of Property Research gain next year. Frankfurt tops growth ex- prior level of 2007, after prices and yields close to the peak ing certificate. Vuong said, “Despite a slight slowdown (gif) and the Center for Real Estate pectations for 2016 at +2%, followed by volume reached €38.2bn by the end of year of 2007. Total return across the cit- The building serves as Société in performance in comparison to Q2, Studies CRES of the Steinbeis private Munich and Düsseldorf with +1.5%. Only the third quarter. ies rose 12.1% from 9.4% in 2Q15. Here, Générale’s headquarters in Germany the Q3 results show that the non-listed university in Berlin, based on a survey of Hamburg is not expected to show rental Tschammler expects prime office performance was driven by Munich and the bank occupies the 11th to 16th real estate sector continues to perform professional researchers. gains. “With growth rates between 1% yields to fall under 4% in other German which posted 16.3%, followed by Berlin floors, while investment advisory group strongly. Southern Europe is an inter- Office yields in Germany’s top five and 2%, rental markets show no signs cities in 2016, averaging 25-35bp across (+14.4%), Frankfurt (+11.8%), Düssel- Deutsche Vermögensberatung AG is the esting story. There has been growing cities are set for record lows next year of overheating yet,” commented Felix the top seven urban centres in Germa- dorf (+8.6%) and Hamburg (+8.1%). second largest tenant. Other tenants in- investor appetite for this region, espe- at 4%-4.4%, and even below the 4%- Schindler, professor at CRES. ny. But he also expects more contraction clude Cerberus Capital Management, cially from the US, and these perfor- mark in Munich. The new figures are Speaking recently at a gathering of in- in assets such as logistics where yields Huxley Associates, The Bank of New mance figures support the prospect of even lower than the gif/CRES survey dustry professionals, JLL Deutschland’s for prime have fallen sharply to 5.25%. Germany/Acquisitions York Mellon and Frankfurter Spar- further investment in this region.” results from May 2015. international director Timo Tschammler “I would not be surprised to see sub-5% Curzon buys Frankfurt’s kasse 1822 Private Banking. yields in logistics – perhaps not by the Garden Tower, Cornerstone As in the past, the management team of end of the year but certainly in the first co-investor asset management and repositioning spe- quarter of 2016,” he said. cialist Cornerstone Real Estate Advisers Separately, the JLL quarterly Victor Curzon Capital Part- has co-invested along- Index, which tracks the performance ners IV (CCP IV), a side CCP IV, similarly to of prime offices in Germany’s major core-plus fund advised several other previous business cities, showed prime office by pan-European real deals in Germany by prices rising by 2.5% in the third quar- estate investment man- other funds advised by ter, boosted mainly by a strong perfor- ager Tristan Capital Tristan. mance in Berlin. Partners, has bought According to Ralf Kemper (pictured, the Garden Tower, above) JLL Deutschland’s head of valu- (pictured) a prominent Germany/Student Housing ation and transaction advisory, “Germa- 27,500 sqm multi- Rising German Financial Modelling ny as a secure location, underpinned by tenant office tower student numbers positive fundamental data for property in Frankfurt’s bank- adding to hous- learn the nuMber 1 Skill in real eState Finance as well as the general economy, is fur- ing district for €175 ing pressure thering the strong engagement of Ger- million. The German learn to build full financial models man and international investors. Among management team at House prices in Germa- Simple step-by-step instructions institutional investors, the property share Cornerstone Advisors ny’s leading university 100% online has risen significantly over the past years is co-investing in the deal with Corner- cities are coming under pressure not fully accredited by IRE|BS Real Estate academy from below 5% to up to 10% now, a stone handling asset management. least from the rising numbers of students mark we expect will be surpassed in the The Garden Tower is 126 metres tall in the country’s centres of learning, ac- medium term.” and consists of 27 floors above and five cording to a new report by Berlin-based Berlin is proving particularly attractive below ground, built on a site of around property developer BGI AG. for investors, with a buoyant rental mar- 2,141 sq.m. The building was construct- For the coming winter 2015/16, a total ket and investors’ belief in further growth ed between 1973 and 1976 as the head- of 2.7 million students are registered, a potential. “The Berlin market is especial- quarters of Landesbank Hessen-Thürin- rise of 2.2% on 2014/15, based on figures To lEaRn moRE aBouT ouR InTRoducToRy fInancIal modEllInG couRSE, vISIT uS aT IRE|BS Immobilienakademie GmbH www.irebs-immobilienakademie.de/online-courses Barocketage | Kloster Eberbach | 65346 Eltville ly attractive for technology and start-up gen (Helaba) before the bank moved from the German Federal Office of Sta- Telefon: 06723 9950-30 firms due to its innovative environment,” to the nearby Main-Tower in 1999, and tistics. This is helping to push up prices, said Kemper, adding that this was having was one of the first high-rise buildings in with cities such as Freiburg, Tübingen, 28 29 www.refire-online.com

Aachen, Giessen and Marburg building restraints it is cheaper to con- Meanwhile, the Manchester-based which around €140m has been drawn refurbished by Edeka’s CEV division, particularly affected. struct large flats rather than student student accomodation specialist Cross- down. A second student housing fund is including adding such improvements The number of markets de- apartments.” lane said it plans to boost its German planned and Bouwfonds already holds as a bakery store-in-a-store and addi- fined as “tight” for housing has The GBI study analysed all 87 cit- holdings to 10,000 units over the next five 24 developments worth around €430m, tional parking. The total lettable space risen from last year’s 32 to 39 ies in Germany with universities with years after identifying real potential in the with 6,000 residential units in Germany, is 20,360 sqm. Most of the stores are this year, with 19 cities having more than 5,000 students enrolled, asset class in Germany. It currently has France, the Netherlands and the UK. located in Bavaria, Lower Saxony and “acute difficulties” in finding and found that supply for students is only 500 units in the German market. Saxony. The selling agent acting for the adequate accomodation for especially tight in Munich, Frankfurt, With the shortage of small affordable Edeka group was JenAcon GmbH, as their student population, a rise Hamburg, Stuttgart and Cologne. New flats in German cities, allied to increas- Germany/Retail real estate in the earlier March transaction. from the 13 such cities recorded in previ- with Munich costing €510 per month, al- cities entering the ranks of “difficult” this ing numbers of foreign students drawn GPEP expands Netto portfo- GPEP also bought three further Net- ous years. though the Statistics Office confirms that year are Aachen, Bonn and Düsseldorf. to German universities by very low fees, lio with €30m, 17-store deal to stores in Berlin, Halle and Arnstorf, According to Stefan Brauckmann, the number of students in the state is up GBI is a 50/50 joint venture between the new Crosslane CEO Matthew Ryall said, with a total of 3,200 sqm, and of which the head of research and analysis at GBI 2.6% on last year. Moses Mendelssohn Foundation and “The offer-demand gap makes a strong The Frankfurt-based opportunistic as- the Berlin and Halle stores were sold by AG, “The figures from the Statistics Office In Germany’s eastern states, where the Düsseldorf–based Frankonia Verrmö- case for investment into Germany. In- set manager GPEP and its partner Uni- developer Hoepfner BauInvest Plus, a show that young people have not been rents average €260 in the larger states, gensverwaltung GmbH. Previous and vestments in student housing assets can versal-Investment have added to the subsidiary of the Karlsruhe-based brew- scared off by the scarcity of housing in student numbers fell, especially in planned developments include 48 hotels, achieve attractive, stable yields and re- portfolio of twelve Netto discount super- er Hoepfner. The Netto store in Arnstorf choosing their university for the 2015/16 Thuringia. Potsdam at €310 is an excep- serviced apartments and student residenc- duce portfolio volatility,” he said. “Com- markets which they originally was sold by Morris Immo- winter semester.” This is evidenced by tion, due to its proximity to Berlin. “The es with 9,426 rooms and apartments, as pared to micro-apartments, student bought in March for a Universal bilien. the higher-priced university cities such gap between the popularity of universi- well as 246 housing units. The group has properties are far less susceptible to eco- Spezialfonds. They have bought The Spezialfonds is set as Hamburg, where a student room in a ties is widening,” said Brauckmann. Over invested nearly €1bn, and has 400,000 nomic developments.” a further 17 Netto stores and an up and managed by Uni- communal house costs €420 per month, the past 10 years, North Rhine-West- sqm of gross lettable space under man- Another company beefing up its in- Edeka store for a price thought versal for an occupational the highest in the country (behind Mu- phalia registered the strongest growth in agement. Its hotels include economy, bud- volvement in the sector is Dutch group to be around €30m. pension fund, and focuses nich) and €10.00 higher than last year. student numbers, up by 58%, ahead of get, design and long-stay projects in cities Bouwfonds, the real estate subsidiary 14 of the Netto stores and on downtown office and Nonetheless the number of students Saarland (55%) and Hesse (49%). such as Frankfurt, Berlin, Hamburg and of Dutch cooperative bank Rabobank. the Edeka store were sold by retail properties. Univeral registered for the new semester is 2.8% At present a framework for more stu- Nuremberg, while its SMARTments brand The group’s European Student Housing Edeka marketing subsidiary Markt- handle the funds structure and adminis- higher than last year. dent housing development is lacking in builds and operates student apartments, Fund had a final closing this year and is kauf, each with a 15-year lease dura- tration, while GPEP look after the portfo-

In Bavaria the price for a room is €405, most university cities,GRAPH-3 he said. “Due to serviced apartment and city apartments. fully syndicated with equity of €240m, of tion, and which had been renovated and lio, property and asset management.

GRAPH-1

Total Return Performance GPR 250 Index (€) 200

Total Return Performance GPR 250 Index (€) 250

GPR 250 Europe

150 200 GPR 250 Germany

150 100

100

GPR 250 Europe 50 50

GPR 250 Germany

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

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

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

Guest Column: George Salden (12) quately take into account the various cash flows for The starting point of dynamic rating is to design a stan- distribution curve. This enables a presentation of the the period of management and the time and amount dard that is largely resistant to unrealistic assumptions. probability with which certain risk scenarios may occur. SERIES: The German Real Estate Market: of the projected resale values. In this second stage the This is achieved by taking a second factor into account Compiling a Rating is the Key to Rate of results provided by each business case must be com- in addition to the internal rate of return: risk. Finally, the expectation of return and the measure of risk Return pared. We have chosen the internal rate of return (IRR) make allocation of a rating code possible. The classifi- as our method. This enables one to arrive at a different Risk is a concept that is frequently used. The various cation system of the dynamic method is hereby closely Welcome to the finale! This column brings us to the end internal rate of return for any resale time. Using this de- meanings subsumed thereunder are as various as its related to that used by credit rating agencies. It is divid- of our overview of the characteristics of the German cision-making criterion, one can also determine when use. It is therefore important to initially define what we ed from Aaa, minimal credit risk, to Ccc, very high cred- real estate market. We are now well acquainted the property is to be resold so understand as risk both generally and specifically. The it risk. It must then be decided which rating code is to with the dynamic method for calculating rate of that the invested capital is being lowest common denominator thereby is the following be assigned when a certain risk X and a certain internal return. However, there is one last matter to con- used efficiently. Once this point definition: “Description of an event with the possibility of interest rate Y are ascertained. The dynamic method sider: real estate ratings. is determined the investment has a negative outcome.” In concrete terms, what constitutes then proceeds in evaluating the collected information been fully defined. In the final negative outcome is determined from context, on the ba- concerning the chance/risk profile of an investment, In the last two columns that appeared we step it is only necessary to rate sis of perspective, as well as from personal preference. rates it, and in this way makes comparison possible. demonstrated that the external financial re- the investment. Stated different- In dynamic rating, risk is the possibility that cash flows The classification is based on investment grade. Each porting that is common in Germany provides ly: what risk is associated with that have been projected based on individual assump- class has its own investment/risk profile, because as important figures that are used in the dynamic the return to be realised? tions may deviate from the income and payment that one mentioned in previous sections one anticipates differ- method to determine the return possibilities of would assume based on knowledge and application of ent returns according to different investment classes. a real estate investment. At first glance it would In practice there are various ap- the marketplace. Similar to the insurance industry these For super core real estate one already anticipates a sig- seem that all information necessary for a real proaches to rating real estate. negative effects are multiplied by likelihood to quantify nificantly lower return from a good investment than in estate investment has been compiled and analysed: None of them have as yet firmly established themselves the realised risk. The result is a monetary amount. In or- the case of development real estate. the value of the real estate is known and the invest- as the leader. The main reason for uncertainty in regard der to normalise this measure of risk, the amount must ment is presented on the balance sheet level. to rating real estate is the non-transparent procedure be viewed in relation to the initial price paid at the start of Through dynamic rating based on market data, the dy- The classic methodology of property valuation con- involved. More specifically, there is no agreement as to the investment. Only thus can the measure of risk for real namic method opens up completely new opportunities cludes its work at this point. The discounted cash flow how real estate ratings must be structured and what estate be compared in relation to different prices. for assessment. This is because both the rate of return method is most certainly an effective way of presenting information they are to provide. The dynamic rating on a real estate investment and the inherent risk are as- a real estate investment as a business case, however, that is presented here is therefore not a rating in the A limitation should be briefly mentioned at this point: sessed. The dynamic method thereby makes possible its area of application ends there. As we have already sense of a credit assessment, but rather the classifica- a critical component of forecasted cash flows are the a holistic evaluation of all aspects of an investment. A determined, all procedures ascertain the actual value tion of property on the basis of the chances and risks on-going costs for managing the real estate. Here certain special aspect of the dynamic rating method is that un- of real estate. Yet they do not provide any help in re- of an investment, which thereby assesses its quality. levels of expense must be assumed based on the nature realistic accounting methods are no longer possible. If gard to a potential decision to buy. Two essential ques- The goal of a rating is to determine if it is advanta- of the property. Whether or not these assumptions are a cost item is changed, then both the rate of return and tions remain open: geous to purchase a certain piece of property. The first realistic can only be verified based on a comparison with the risk increase. An investment is not thereby rendered criterion in this regard is the opportunity offered by an historical market data. These costs can also enter into “better” and placed in a higher classification category. 1. How long should real estate be held before being investment. This is determined, as described above, the risk calculation. The case is similar with other costs resold? by ascertaining the optimal resale point by taking into that must be taken into consideration, e.g. reconstruc- If at the end you say or rather ask: “That’s all well and 2. Is the purchase advantageous if one takes into ac- consideration all payment flows over the entire invest- tion costs, loss of rent, or asset management expenses. good, but does it work?”, then I can answer you with count the complete investment cycle, including pur- ment cycle and the internal return therefrom. In contrast thereto, in regard to forecasting the future in- the utmost conviction: “Yes it does, because my col- chase, management and resale? terest rate that must be paid for follow-up financing, no leagues and I have long worked according to this meth- Such a decision can generally not be made solely figure that represents an exact expectancy value can be od - day by day and transaction by transaction.” on the basis of the internal interest rate. The reason established. As a result this variable must be excluded In determining the optimal investment period all pro- therefor is that estimations and assumptions must be from risk assessment for systematic reasons. George Salden is the author of the book “Die Dynamische jected cash flows and other values that are used in made concerning the future development of income Methode” [The Dynamic Method] based on his 19 years of compiling profit and loss accounts, balance sheets and expenditures. It is at this point that one encoun- The probability values used to determine the measure of experience as an expert and manager in property and trans- and cash flow statements must be taken into consid- ters difficulties. They may take the form of lack of ex- risk are derived from the market place. Such probabilities action management which highlights the way towards a eration and a business case must thereby be prepared. perience, insufficient knowledge of the market or even are usually not represented by a single value but instead whole new method of determining the profitability of prop- Yet when one is speaking of a specific business case, attempts at manipulation, all with the result that the spread over a recurring pattern. Dynamic rating relies on erties. He was previously a director at alt+kelber Immobil- this is not correct. projected development differs from that which actually how this data is distributed in the investment market. In ienmanagement, a subsidiary of conwert Immobilien Invest takes place. The result remains the same: the calcu- this regard it should be noted that almost all cost pa- SE, where he was responsible for major international trans- This is because the calculation of an optimal invest- lated internal interest rate does not correspond with rameters relevant to a real estate investment business actions. He then took over as International Head of M&A at ment period requires that each holding period be treat- the internal return that is finally realised through the case are normally distributed approximately in their ap- AK Holding GmbH & Co. KG. He is now Head of Transaction/ ed as a unique case. Only thus is it possible to ade- investment. pearance and can be displayed in terms of a Gaussian Executive Board Member at Dr. Lübke & Kelber / Arbireo. 32

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