Watching the Market Cycle Why Devising the Right Exit Strategy Is an Essential Aspect of Professional Property Investment CONTENTS to the POINT
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No. 2 | 2013 places spaces The Real Estate Magazine of Union Investment Investors’ favourite Logistics properties are turning into an asset class of their own Hopes for a recovery How Spain, Italy and Ireland are tackling the effects of the crisis Watching the market cycle Why devising the right exit strategy is an essential aspect of professional property investment CONTENTS TO THE POINT Santiago de Chile: withdrawal from the COVER STORY City versus country: is the investment focus shifting? market at the right time pays off. Page 4 4 Exit strategy Careful analysis and the right timing are crucial to active real estate asset management Christian Ulbrich, CEO for Jones Lang LaSalle’s EMEA region 11 Investment knowledge Interview with Andreas Beck, CEO of the Institute for Asset Accumulation, on the best moment to sell oth in strongly growing societies and sluggish economies almost exclusively on local criteria, as the following examples MARKETS people are drawn to the cities in the search for work. show. In the USA, for instance, the focus is on urban centres, 14 Logistics Warehouse and storage space is well on the way to becoming its own asset class BDynamic population growth does the rest. In countries above all New York, Washington, Los Angeles, Silicon Valley, 16 Infographic Overview of Europe’s transport network of the future and with full employment such as Germany, it is the employers in Boston, Chicago, Houston, Seattle and Dallas. Moreover, in the key logistics hubs turn who set up new branches in attractive cities in the hope of China, 50 percent of real estate capital from abroad flows into 24 Core investments How security-conscious investors are coping with securing skilled labour. one city: Shanghai. the spiralling prices for core properties It therefore comes as no surprise that the interest of property Interestingly, this shift of investment focus from country to Logistics centre in Bad 26 Southern Europe Property markets in Italy and Spain are still suffering Hersfeld: Germany is deemed the effects of the financial crisis; investors are awaiting a turning point investors is changing. Following the global trend, they are city criteria offers completely new opportunities for the major the most attractive market for investors. Page 14 29 Ireland The country is making good progress in getting over the focusing on major cities and the surrounding regions benefiting cities of emerging nations. Countries such as the Philippines financial crisis, justifying hopes for a recovery in real estate markets from this centring process. It is the metropolitan areas chiefly and Malaysia may still be facing massive challenges. However, that attract the new major construction projects to which global sufficiently sound legal and tax systems that have already passed CONCEPTS investment capital is drawn. Country markets as such are being the investment criteria set by many investors mean that the 18 Constructed visions Architects, engineers and city planners are compared less and less. London and Paris rank among the key future economic prospects offered by these regional centres are working on the buildings of tomorrow destinations for investment within Europe. If, on the other hand, now dominating investment considerations. Consequently, we 32 Construction hoardings How cities and developers are turning a necessary evil into a successful communication tool the economic performance and future prospects of a country are witnessing a marked increase in foreign investment in the were the chief selection criteria, London and certainly Paris real estate of those countries. The Bio Intelligent Quotient House, PortFOLIO would come behind major German cities. Location, location, location – this catchphrase has thus gone BIQ, in Hamburg. 30 Credit funds Instead of investing directly in real estate, professional Page 18 Does that mean that a country’s specific characteristics no global and does not recognise international borders. Cities investors can get involved in financing it through funds longer play any role in investment allocation? Certainly not. The and locations have long been competing against one another NEWS country assessment is the first step, of course. Investors examine globally. Developing countries in particular could benefit 12 Open-ended real estate funds The sector has adapted smoothly to countries on the basis of such criteria as national legislation, fiscal from this competition in the long term. Keeping an eye on the the new legislative framework environment, political stability and sustainability. Susceptibility to emerging megacities across Asia, Africa and South America 13 Union Investment Investment Climate Survey: Eurozone crisis corruption also plays a role. If a country passes these hurdles, would therefore be well worthwhile. • changes investment strategy; book: sustainability reflected in Prime Property Award; improved ratings for open-ended real estate funds then national considerations are in fact largely replaced by city-specific aspects. WIDE ANGLE The best example of this is Moscow. From 38 Office tools Interesting facts about stationery a purely economic perspective, Russia’s Art on a site capital is a major city with huge growth hoarding in ACQUISITIONS Copenhagen: potential offering attractive investment 39 Union Investment New additions to the portfolio: Hotel Barceló Raval added value for in Barcelona; Space 20 office block in Darmstadt; Euro Plaza IV office opportunities. On the basis of the country developers and passers-by. Page 32 complex in Vienna assessment, however, most investors adopt a more cautious approach and would not 13 IMPRINT & CONTACT even get as far as considering the specific characteristics of particular regions. Christian Ulbrich is responsible as CEO for COVER PICTURE Yet if the national features fade into the the Europe, Middle East and Africa (EMEA) Plaza de la Constitución in Chile’s capital Santiago with the official residence region at Jones Lang LaSalle in London. of the Republic’s President, the Palacio de La Moneda. Christian Gahl; Gavin Hellier; Photos: Corbis (Composing); Jones Lang LaSalle Lene Skytthe; Waldkirch; bildagentur hamburg/Rainer background, investor interest now falls [email protected] 2 places & spaces 2|2013 places & spaces 2|2013 3 COVER STORY t was a piece of news which caused quite a stir in the world of international property investors: in December 2006, Union Timing is everything IInvestment announced it had purchased the Birmann 24 office building in Santiago de Chile for its open-ended real estate fund The days when investors held on to real estate for UniImmo: Global. The Hamburg-based company thus became the first German real estate fund to take the plunge in Latin America – and, decades have long gone. Today’s strategy of active asset with Chile, in a country which now as then is regarded as one of the world’s emerging markets. The striking sixteen-storey skyscraper management includes ongoing portfolio adjustment. with its semicircular façade was not to remain the company’s only investment in the Chilean capital: over the 18 months that followed By Anne Wiktorin it was joined by another four office blocks, the Torre Paris, the Xerox Building, the Bandera 76 and the Teatinos 254–258. In total, the fund invested some €138 million in the property market of the city at the foot of the Andes. Exactly six years later – in December 2012 – the investment professionals announced their withdrawal from the Chilean market: Union Investment has sold the quintet of buildings for €171 million to the Chilean real estate investor Aurus Renta Inmobiliaria at a profit of some €33 million, a rise of almost 24 percent on the purchase price paid in 2006. The sale of the buildings, which had a very good occupancy rate thanks to active asset management, occurred at a favourable time for divestments: strong new con- struction activity in Santiago, low interest rates and high demand for core properties. Yet it was not just through this successful sale that the investment in Chile had proved a “resounding success story for the fund”, says Volker Noack, Member of the Management Board of Union Investment Real Estate GmbH. “The portfolio pro- vided the fund with a steady rental income over the entire holding The investment in Chile period.” Even a severe earthquake in 2010 did not cloud this has paid off: six years after positive picture. entering the market, Union Investment has sold Radical change in strategy its five buildings in the But why sell at all if buildings with a good occupancy rate are capital Santiago de Chile supplying a steady and reliable income? And is a holding period of at a profit. six years still regarded in the property investment world as a relatively short period? The example from Chile demonstrates in many respects the radical change in strategy which long-term-oriented investors have undergone over the past decade. “The exit – meaning the sale of an individual property or a whole group of properties or the complete withdrawal from a market at the right time – is an essential part of the professional property investor’s trade”, notes Tobias Just, a university professor and Scientific Director of the Irebs International Real Estate Business School attached to Regensburg University. This finding is also reflected in the figures: in 2012 German open-ended real estate funds sold on balance properties worth a good €6 billion, of which those with a value of €4.5 billion were located abroad, according to BVI, the German Investment and Asset Management A ssociation. This contrasted with property purchases totalling €4.4 billion, of which €3.5 billion was invested outside Germany. Property investors – including the managers of open-ended real estate funds – have not always been so active, as Just, a quali- fied economist, knows: “Conventional institutional investors, such as insurance companies as well as family offices, have accumu- lated properties in their portfolios en passant over many decades – and an exit was often not even envisaged.” Buy to hold was the simple formula, not only among German but also among the 3 Photo: Tophoven/laif Photo: Frank majority of European real estate investors.