REFIRE: German Resi Increasingly Differentiated as Market Heats Up
According to REFIRE:
It’s easy to see Berlin’s attraction for investors: multi-family capital values ‘have been on fire’, according to a report published this month by Green Street Advisors, which describes the city as ‘one of the most intriguing across Europe and North America, in terms of its socio-economic transformations currently underway’.
And as the market matures, so do investment tactics. Pension funds are also changing investment tack, Peter Papadakos, managing director at consultancy Green Street Advisors and their lead research analyst for the Continental European region, told REFIRE: ‘Pension funds are forward funding developments and taking on leasing risk,’ he said. ‘They like to buy new stock where they won’t have to spend much for the next 10 years, rather than old, capex-hungry stock where rents are set according to the market.’
‘We don’t see many portfolios this size, so there will be international interest,’ Papadakos said. ‘After all, Blackstone bought a residential portfolio in Berlin this year. That’s an investor who expects high returns but they clearly see traction in the market.’ (In May, Blackstone’s European Core+ platform acquired a portfolio of 2,500 residential units located in Berlin, the majority of which are concentrated in prime inner-city districts, with additional units in Brandenburg and Magdeburg, from a joint venture which includes, among others, KauriCAB Management and Apeiron/Ailon for an undisclosed sum. TAG Immobilien has also put a resi portfolio expected to fetch around €100m on the market, according to market sources.
Germany’s listed residential companies, which control around €80b of assets, are betting big on modernization, according to Papadakos. ‘These companies are taking in around €4b to €5b a year in rent and spending an additional €2b a year on modernizations. This is the clearest trend we see. It’s picked up a lot in the last three years as they tap into projected future growth, both in terms of capital values and rental growth.’
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