ING Can Cannes Can-Can in 2010? - Property Investor Europe PIE... · Can Cannes Can-Can in 2010?...

Can Cannes Can-Can in 2010?The chance to dance exceeds 2009 as real estate animal spirits revive

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CONTINENTAL REAL ESTATE INTELLIGENCE FOR US & GLOBAL INVESTORS Edition 156, March 2010

Hans Volckens, Hannover Leasing

Jens Tolckmitt, Ass. GermanPfandbrief Bks

We would like to thank all our clients and look forward to further

successful transactions in 2010.

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08.03.10 PIE Coverstrip.indd 1 03.03.10 10:12

INSIDE ❱❱〉

Eric Rosedale, Salans

Rüdiger Mrotzek, Hamborner

Michiel Rang, ING

Keith Fischer, Elystan

Antonio Intiglietta, EIRE

Philip Charls, EPRA

Stefan Seip, BVI

Pierre Paumelle, Val-de-Marne

pROpERTy INVESTOR EUROpE l Edition 156 l March 2010 l www.pfeurope.eu 3

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after last year’s MIPIM when our cover showed storm clouds gathering over Cannes we had to pose the key can-can question again for 2010 just to test the, em, waters around the port. For European real estate animal spirits now genu-

inely are lifting the boats following the profound shock and unprecedented market volatility of the 18 months a.L. - after Lehman. Thanks for your complements on this splendid team-effort MIPIM 2010 PIE; you’re welcome! Yet another record size for us as we gain increasing support from You in the market for our efforts to provide trans-parency in continental property. Thanks especially to our advertisers and sponsors.

You’ll find in PIE 156 our usual mix of tight reporting on a wide and deep range of European real estate issues – no fewer than eight cover interviews to check the real estate market from different angles, including an interesting Q&A from law firm Salans on implications of Year of the Golden Tiger (animal spirits!), two profiles of rapidly-chang-ing regions Val de Marne and Polish cities that should be of great interest for investors trying to gain understanding, and PIE’s now-traditional span of sections so You the reader know where to look. These are supplemented in this baking by Retail Real Estate. It has won its own section because of the bee-hive of activity now across greenfields, brownfields and high streets of Europe – particularly to the East and South.

A fantastic and fascinating time was had by all at PIE’s CEE Property Breakfast last month, and you find this fully reported in these pages. Next on the PIE-for-Breakfast menu is France on 28 April in London. To coincide, PIE is delighted to announce two new appointments in the crucial French market. Bernhard Meyer, MD of CIFRAL, signs on as Business Development Director, while experienced financial journalist Steve Whitehouse boosts our coverage of this very active marketplace. Welcome to both! Contact details inside… Oh, and you can assume that PIE visibil-ity brings home the beef. One interviewee last month confided afterwards: “I had been trying to reach one fund manager for months and he never even returned my calls. To my surprise, he called on the day of your publication, explaining that he was just reading about me in PIE.” Merry MIPIM, and don’t forget to can-can!

Allan Saunderson, Managing Editor

Animal spirits revive in the year of the Golden Tiger

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Sale and lease back of Spanish bank portfolioJV with RREEF and AREA Property Partners

Prime shopping centreJV with SCOOP Asset Management

Prime shopping centreJV with Real-ITY GmbH

Light industrial parksJV with M7 Real Estate

BBVA Portfolio€1,230,000,000

Spain

Fremlin Walk€81,200,000

Maidstone

Forum Steglitz€68,500,000

BerlinGermany

LIPP€33,700,000

UKLight Industrial

Property Portfolio

Europa Capital has invested in transactions exceeding €6 billion across 17 European countries

on behalf of its investors

Pan-European Property SpecialistsRecent Transactions

PFE_276x213 22/2/10 19:45 Page 1

4 pROpERTy INVESTOR EUROpE l Edition 156 l March 2010 l www.pfeurope.eu

CoNtENtS

66PAGE

34PAGE

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38PAGE

6 positioning for RecoveryRivero, Metrovacesa to stay in Gecina; Colonial agrees restructuring; Chinese look at Germany

16 Cover InterviewsEPF 16; ASPIM 17; Hamborner 18; Elystan 20; IEIF 22; EPRA 24-25

26 Listed Real EstateFrench Gecina into loss; Unibail-Rodamco-better 2010; CA Immo; Corio in loss; IVG investor

34 MIpIM Awards 2010Historic CEE hotels up for MIPIM Hotels & Tourism awards –Augustine, Prague; andels Lodz

36 Cover InterviewsSalans 36-37; AXA 38-39

40 property FundsGerman funds look to legal reforms; France’s UFG ups investment; Spanish fund law may not help openings

46 property Finance/BankingSchroders positive on funds; Aareal falls but sees rising trend; Eurohypo eyes €10bn new business

52 Greening the Built EnvironmentStockholm’s green at MIPIM; Green to become asset class; Prime Office Munich tower wins gold

56 Residential propertyBerlin housing IPO held up by Senate; Spanish permits’ slide slows; Sofia prices to fall another 10%

60 Shopping Centres / RetailCommerz Real’s first French mall; Unibail sells NL malls, buys Simon assets; Altarea revenues stable

64 Changing Face of EuropeVal-de-Marne to benefit from Grand Paris infrastructure; MIPIM honours Poland’s growing attractiveness

68 CEE property BreakfastPIE Property Breakfast sees positive signs; Recovery starts from core, yields slipping; Chinese also seen

70 Central & Eastern EuropeEcho’s stable profit stable; Serbia’s Atlas in Montenegro with Abu Dhabi; Investors revive Bucharest project

74 Russia/CISRussia investment has hit bottom; Stabilisation in Moscow office; Sweden’s Oriflame enters Novosibirsk

77 Reports/StudiesBarcelona lettings grow; JLL sees German office higher; European investment boosted by size, volume

Guest Columns 11 Michiel Rang, ING Commercial Banking 47 Antonio Intiglietta; Expo Italia Real Estate 53 Kristofer Prander, Vencom Property Partners 71 Jacqueline Stuart; Slovenia Invest 75 Andreas Schiller; Property Points East

3 Editorial/Flag 4 Contents 50 Charts 55 Bulletin Board 81 People 82 Forward thinking

Visit us at MIPIM in Cannes, Riviera Hall R33.10 or contact us to discuss your financing needs.

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poSItIoNINg For rECovEry

Invesco invests €237m in Accor hotels, Stockholm Global investment manager Invesco Real Estate has made nearly €237m of acquisitions, buying five ho-tels from hotel group Accor for €154m and making its second investment of 2009 in Stockholm, buying Paradiset 29 office and retail property for €82.5m.

Accor said its sales to Invesco cover Pullman Paris La Défense, Novotel Muenchen City in Munich, Mercure Zabatova in Bratislava, and Rome’s Novotel Roma la Rustica and Mercure Corso Trieste. Invesco is paying €80m for the La Défense asset, including a €10m renovation program. The deal for the four Novotel and Mercure hotels is a sale and leaseback agreement. The sales form part of Accor’s strategy of reducing earnings volatility and focusing on manage-ment. It will continue to operate all properties.

The Paradiset 29 acquisition takes Invesco’s invest-ment in Stockholm to €148.5m so far this year, fol-lowing the €66m buy of the newly-constructed Mar-riott Courtyard Hotel. Paradiset 29 contains 13,000 sq.m. of retail space and 10,300 sq.m. of office. Local food giant ICA Maxi is the largest tenant. The build-ing was acquired for a pan-European fund. Said In-vesco fund manager Bettina Knirsch: “Paradiset fur-ther complements the fund’s existing portfolio, which is extremely important during a period in the market cycle where investors are placing a real premium on such characteristics.” pie (Full story first published in PIE 155, 1 March)

Rivero, Metrovacesa to stay in Gecina equityJoaquin Rivero and his ally Juan Bautista Soler in-tend to hold onto stakes in French REIT/SIIC Geci-na and back its new development strategy even though Rivero had to step down as chairman and CEO in recent months, new chairman Bernard Michel said. And there is no sign that Madrid-based Metrovacesa, the company’s other main shareholder, is looking to sell its 26.9% equity stake.

Rivero was replaced as CEO in November by Christophe Clamageran, formerly CEO of Hammer-son France. He resigned as chairman last month after coming under intense pressure from small sharehold-ers over a number of highly opaque corporate moves. But Rivero remains a member of the board and he and Soler, a long time a professional ally, hold a com-bined 31.5% of capital. “Their position at this stage is that they intend to remain stable shareholders,” Michel said at a presentation on 2009 results.

Metrovacesa was previously looking to separate from Gecina but acknowledged last year that it was no longer possible to carry out a 2007 separation agreement to cede the stake in exchange for €1.8bn of its assets. Michel said Metrovacesa, also represent-ed on the Gecina board, has endorsed Gecina’s new development strategy. But he added: “There is no guarantee. There is no shareholder pact. But the strategy outlined by the CEO was adopted unani-mously by the board.” Insurance group Predica, of which Michel is also CEO, is also a long-term inves-tor and intends to remain a stable shareholder.

Clamageran will present a new strategic plan in a few months, and has already identified a number of key changes which, include an orderly withdrawal from Spain to focus on France. It will also exit logis-tics once market conditions allow and does not see hotels as strategic. Gecina will realign activities around sectors where it already has a leading posi-tion such as office and residential, or critical mass such as healthcare. It intends to maintain control of its Gecimed unit but will look to bring in new part-ners through a capital increase. Clamageran has also focused on giving Gecina greater financial flexibility since taking over as CEO. The firm is seeking to re-negotiate €800m of 2011 credit lines and €500m of this has already been approved by bank credit com-mittees. Disposals of €130m of residential assets and €100m of office are already covered under agree-ments to sell or at a advanced stages. The new board structure put in place last June means all sharehold-ers are now represented equitably and the board is able to function properly, he said. The changes made ph

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Third largest French REIT Gecina undergoes a changing of the guard in Paris as Joacquin Rivero cedes the Chair five months after stepping down as CEO.


in governance mean Gecina has now entered a new chapter of its development. pie

PIE COMMENT: With Rivero under strong accusa-tions in regard to various actions over the last two years in Gecina’s balance sheet, it was always going to be Pred-ica, the largest shareholder, that was in the hot seat to do something about it. Now, apparently, it has. Despite protestations to the contrary, we do not assume that Riv-ero jumped, but that he was pushed. The bottom line is that French financial market supervisors cannot allow corporate manoeuvres to take place in France of the kind to which Spanish regulator CNMV has successfully turned a blind eye over the last few years. The French REIT/SIIC community is happy to see this change of guard; Michel is likely only to be an interim measure while shareholders and the sector seek a suitable perma-nent chairman for this huge portfolio.

Spain’s Colonial agrees €5bn debt restructuring Spain’s struggling listed property group Colonial has sealed an agreement to refinance €4.9bn of debt, concluding more than six months of tense talks with its creditors. It will also transfer land activity and de-velopments to an affiliate.

The firm, which owns assets recently valued at €8.9bn, said the agreement covers restructuring all financial debt, within a feasibility plan designed by management team which has been validated by an independent expert. Colonial is to make two share issues of €1.9bn each and use its stake in French

REIT/SIIC Société Foncière Lyonnaise as guarantee. Creditors include Calyon, Eurohypo and Royal Bank of Scotland. Goldman Sachs sold its share of a syndi-cated loan last year, and also its 6% stake in SFL which was swapped for other debt. Colonial shares closed up 1.8% after the news in late February at €0.16, but were lower in line with the sector at the start of March.

Colonial’s troubles began in late 2007 when then-chairman Luis Portillo – in the early decade, one of Spain’s more successful corporate raiders – became completely overextended as the domestic Spanish cri-sis, sparked by a collapsing residential market, was exacerbated by the onset of the global financial melt-down. Its debt at one stage was estimated at some €9bn, with foreign banks having granted a €7.2bn syndicated loan - and the remainder borrowed from local savings and commercial institutions. Colonial in 2007 purchased the shopping centre developer Ri-ofisa for €2bn. Colonial creditors in 2008 brought in a management team headed by Juan José Brugera and restructuring specialist Pere Vinolas. For 3Q09, it reported operating profit of €159m. pie

PIE COMMENT: Vinolas is among the more clear-head-ed and communicative of the Spanish real estate sector, a talent that stands him in good stead for the mountainous task of clearing up Portillo’s badly thought-out, over-arch-ing ambitions. Few others come out of the Colonial fiasco looking good and Spain’s corporate raiders – including Gecina’s now-ex chairman Joacquin Rivero – are definite-ly among the most popular figures in French listed real es-tate, which they invaded last decade. Only the Paris-based Orion Capital, which bought Goldman’s 6% of SFL early last year, showed the shrewdness and calm to reap benefit.

Aviva, predica sign for La Défense tower UK insurer Aviva and Crédit Agricole insurance unit Predica have signed an agreement to construct the 166-metre, 47,000 sq.m. office tower Carpe Diem in the La Défense business district on the western edge of Paris.

The tower is a key element in La Défense manage-ment firm EPAD’s plan for renewal of the business dis-trict, with first-generation buildings replaced through a series of demolition-reconstruction projects. EPAD (Établissement public d’aménagement de la Défense) eased terms of sale of building rights for Carpe Diem and four other new towers at the end of January. Carpe Diem will replace the France Telecom building, and is due to be delivered in 2012. The project focuses strong- ph

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After EPAD eased the rules for development in La Défense (pictured) UK insurer Aviva and Crédit Agricole insurance unit Predica have signed to construct the 166-metre, 47,000 sq.m. office skyscraper Carpe Diem.


ly on environmental quality and is expected to be the first in France to achieve both HQE (Haute Qualité Environnementale) certification from the French build-ing research centre and US LEED Gold certification.

Aviva France and its property unit Aviva Investors Real Estate France have been working on plans for the past three years, but the project will be completed by a joint venture in which Aviva France and Predica will each have 50%. The JV will take the form of an SCI property management company (Société Civile Immobilière). pie

Hines applies for insol-vency on Barcelona assetUS-based investment manager Hines in mid-Febru-ary applied to a Barcelona court to declare insolvency of its Tripark development in Barcelona, owned by Hines European Development Fund II, due to ina-bility to pay its debts.

The measure gives Hines three months to find li-quidity to meet Tripark financial obligations or file for full bankruptcy. Hines Interests España, which owns and manages the project is one of the most profession-ally managed developers in Spain but has not been able to commence construction on the 15,000 sq.m. development site in Augusta Business Park, in the Sant Cugat de Valles district of Barcelona. It originally planned an office park of close to 24,000 sq.m. Ac-cording to Spanish daily, Expansión, Hines is negotiat-ing the sale of the land to Solvia, a real estate subsidiary of Banco Sabadell, which financed the site purchase.

The court process will not affect Hine’s other ac-tivities in Spain where, since 1996 it has developed some 500,000 sq.m. of residential and commercial floors pace. Current projects include Malaga Tripark (15,639 sq.m) due for completion at end-2011 and

recently completed Tripark Las Rozas (32,400 sq.m.) in Madrid where it has just signed a letting contract on 30% of the accommodation. Hines España is run by three managing directors: Fernando Arenas, Miguel Ramos and Jamie Rea. pie

PIE COMMENT: Even the Spanish market seems to be reviving somewhat, but the recovery is by no means in full swing, loaded down by soaring unemployment and the disastrous impact on companies and households by the still-collapsed housing market. The Malaga could still pose problems for Hine since that local market is lagging well behind any small upturn being seen in pockets in Barcelona now.

Asian investors, including Chinese, looking at GermanyAsia-based investors are becoming increasingly inter-ested in German commercial property, says the head of King Sturge Germany. Chinese investors are checking the market for potential investment, while India-based investors, particularly families, are already active.

Sascha Hettrich said Chinese capital has not yet invested in Germany but this is likely to come soon. “Chinese investors are looking around now, knock-ing on a lot of doors and informing themselves, while we have seen quite a lot of Indian-source capital in-vested here already over the last three years,” he told a news briefing in Frankfurt. He expects both capital sources to use direct and indirect channels to invest in Germany, seen as a core investment in global prop-erty terms. “The first Indian funds are now looking for commitments from back home to make invest-ments in Germany,” he added.

The new interest is part of a gradual return of for-eign investors to the German market. Mid-East in-vestors have already been active. Also, said Hettrich, “The US and the UK are back!” Even if the Irish are not yet visible, net yields of up to 5% in Germany are highly attractive compared to under 3% on offer in Dublin or other centres such as Copenhagen. pie

PIE COMMENT: This is a development we have expected for some time – when Germany as a nation begins to ben-efit from its steady, if slow, economic development and highly stable political environment. While sightings of Chi-nese investors in German real estate proved in the past to be chimera, it was only a matter of time before new Beijing wariness over ever-growing dollar investments prompted checks of other potential and diversified asset pools. ph

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Finnish 2009 all-property total returns fall to 3.8% The total return on the Finnish direct property invest-ment market in 2009 was 3.8%, says research firm KTI. Of the two components, income return remained high at 6.4%, while capital growth slid to a negative 2.5%, depressed in nearly all sectors by the increase in yields.

However, the continued rise of rental values sof-tened pressure on capital values for shopping centres, residential and industrial properties in particular. Residential was the only sector producing positive capital growth, at 1.8%. Property was the worst per-forming asset class compared to equities and the bond market, which produced total returns of 16.4% and 5.2% respectively. But listed property shares had returns as high as 55.4% in 2009.


Market-based Brady Plan approach may be needed for tackling CMBS challenges By Michiel Rang, Head Europe and Asia, ING Commercial Banking, Real Estate Finance

❙ ❙ ❘ Guest coLumn

We are now in the third year of the glo-

bal economic dislocation stemming

from the credit crisis and there are

clear signs that we are at last entering a period of

stabilisation. As one of the three basic factors of

production encompassing land, labour, and cap-

ital in classical economic theory, real estate in all

its forms, from housing to building services and

commercial property investment, makes up an

estimated 40% of the total global economy.

Therefore it is not surprising that real estate in-

vestment has been severely battered in the fi-

nancial and economic storm and that our future

is closely linked to the evolution of the recovery.

The general expectation is that we’re looking at a

period of at least three to five years of slow to

moderate economic growth that will be mirrored

in the real estate sector, but is this really such a

bad thing? Looking back at the peak of the mar-

ket boom period in 2005 to 2007, it now seems to

have been an aberration from the long-term

trend - created by the availability of cheap mon-

ey and the entry of new types of players into real

estate. These approached their investments from

the perspective of financial structures, rather

than from a deep understanding of the underly-

ing bricks and mortar. I would argue that this

profound correction is probably good for the

long-term health of the sector. The increasing

cost of debt, along with tougher capital require-

ments in the pipeline for banks, will mean greater

equity components for deals, resulting in much

more moderate pricing for the foreseeable future

than the previous hype

ING Real Estate Finance will continue to lend

against A and B-type quality real estate assets

that are well-let, though more marginal invest-

ments and any proposals with development at-

tached to them are off the radar screen at the

moment. I think there will be more capital avail-

able generally for investments in 2010 than last

year, which was all about portfolio management.

But the overall level of transactions will be back

to those seen in the pre-boom period of the early

2000s. We shouldn’t forget than in the 15 years

from the mid-1970s to the early 1990s we had

long stretches of stagflation and slow economic

growth when real estate didn’t really do much. It

was only in the 1990s, when economic activity

picked up a gear, that real estate investment also

got into its stride and if you look at a major city

now, compared with 20 years ago, there has

been a huge improvement in the built environ-

ment. Maybe we’re entering that slower post-

slump world of the 1990s again now, although of

course the real estate market is nowadays far

more mature in terms of transparency, globalisa-

tion, and sophistication of financial structures.

In the early 1990s I was trading Latin American

debt. This followed the so-called ‘lost decade’ for

the region after the eruption of the Latin Ameri-

can debt crisis in 1982 when Mexico announced

it could not honour its loan obligations. Several

solutions were introduced to tackle the per-

ceived problem of liquidity rather than solvency

in these economies, but none succeeded as it be-

came clear countries were not growing out of

debt and, in fact, were becoming more indebted.

It was only after the introduction of the Brady

Plan in 1989 that Latin America found a road out

of its debt crisis. The success of the Brady Plan

hinged on its market-based solution to the prob-

lem; it allowed banks to swap their loans for dis-

counted and par bonds provided they also sup-

plied new money to the countries concerned.

They thus avoided having to write the debt down

to market value on books. Given the substantial

overhang of real estate debt, in particular CMBS,

a Brady Plan equivalent for property could be an

interesting solution. If a way could be found with

government backing to discount this debt to re-

flect long-term underlying property values and

avoid potentially excessive impairment to mar-

ket value, it could attract financially-driven inves-

tors back into the real estate market but on a

more sound basis and with a better understand-

ing of underlying risks. It’s often that we find the

solutions for tomorrow in the past. But that

might be the case this time around if we don’t

want to end-up in the real estate investment

market of the 1980s, or even the 1970s. mr

Michiel Rang can be reached at

[email protected]

Asian investors, including Indian and Chinese institutions, are now checking for opportunities in German real estate, says King Sturge Germany MD Sascha Hettrich.


Retail, the best performing sector in 2003-2007 when strong consumer demand and rising rents add-ed to its attractiveness, was the worst performer for the second consecutive year in 2009 at total 2.6%. Rising yields led to negative capital growth of 3.7%. Capital growth of shopping centres and other retail properties diverged, with malls retaining more value due to rent growth. For other retail, rents turned slightly negative, though at 6.5%, income return for all retail properties was slightly higher than in 2008. Total return for office continued to fall last year, reaching the lowest figure, 2.7%, in the history of the KTI Index. This reflected pressures from the reces-sion. Rising yields and decreasing rents kept offices’ capital growth negative at 3.5%. pie

Tishman Speyer’s Frank-furt Opera Tower 85% let International developer and investor Tishman Speyer early this year made two further lettings to its Opera Tower in Frankfurt, one of Germany’s most prestig-ious office locations, and now has rented out some 85% of the 66,000 sq.m. leasable space.

The international law firm K&L Gates and private equity firm 3i Germany will move in soon, bringing the average lease duration on long-term let to more than 13 years. “The two most recent signings prove that quality prevails also in times of difficult market phases,” said Tishman Speyer Germany MD Markus Wieden-mann. “With an occupancy rate of 85% shortly before completion, we are optimistically looking forward to the year 2010.” K&L Gates is taking 3,000 sq.m. of space and will move into two floors in July. Tishman, which has been struggling with excessive debt in the crisis, particularly in its US commitments, manages a global portfolio of real estate worth some €55bn. pie

PIE COMMENT: Tishman has been especially hard hit by the global crisis, and new lettings such as this must be music to ears of group executives. It comes just weeks after having to give up keys to creditors, alongside BlackRock, on Manhattan’s Peter Cooper Village and Stuyvesant Town complex as they defaulted on debt worth $4.4bn. The group last year was reducing exposure in Germany. But with the rising of commercial real estate values, pres-sure on liquidity in Europe is undoubtedly easing.

US housing, money, banks mean crisis not yet over The world economy is far from exiting the global fi-nancial crisis and three elements point to further weakness - the still very fragile state of US housing, a worrying contraction in money supply and a moun-tain of bad loans still to be worked through by the banking system, the Urban Land Institute conference heard in early February.

Ian Shepherdson, from High Frequency Econom-ics, told the conference in Paris the crisis was a super-cyclical event not seen since the 1930s; damage to banking systems will take years to work through. The earliest growth may resume is 2012 or 2013. “It will be worse than many past crises because the banks are in such bad shape,” he said. However the other major problem is the first contraction of money supply since the Great Depression, and central banks are carefully monitoring this to head off the risk of defla-tion. Shepherdson’s remarks came in contrast to the general tone of the conference, where 68% of real estate specialists expressed the view in an electronic vote that investment should pick up this year.

Shepherdson identified the main causes of the cri-sis as the US Federal Reserve’s rates cuts to 1% at the beginning of the last decade, which he called a gigan-tic mistake. Most excess credit went into residential mortgages in Anglo-Saxon countries, specifically the US. Recent figures show 5m American households own homes with values now at 75% or less than their mortgage debt, presaging a further mass of foreclos-ures. Turning to commercial real estate, he said, “America is now becoming the land of abandoned malls.” Unlet and vacant shopping centres are also now starting to appear in the UK. “It ain’t over; it’s getting worse because the banks are still shrinking their books,” he said. “Expect things to continue to head downward for the next one or 1-1/2 years. It will take until mid-2011 to get back to some degree of normality after all the de-leveraging needed, and it could take longer still.” pie (Story first published in PIE 152 on 8 February)

12 pROpERTy INVESTOR EUROpE l Edition 156 l March 2009 l www.pfeurope.euTHE NETHERLANDS | BELGIUM | CZECH REPUBLIC | FRANCE | GERMANY | ITALY | POLAND | PORTUGAL | SLOVAKIA | SPAIN | SWITZERLAND | TURKEY | UKRAINE | UNITED KINGDOM

Following the 10 openings of 2009, Multi people have their hard hats back on with 14 exciting retail projects now under construction. Germany - Boulevard Berlin. Netherlands - Hermitage Shopping Zaandam, Stadskwartier Nieuwegein, Bilgaard Leeuwarden, Stadsplein Spijkenisse, Vleuterweide Utrecht, Bagijnhof Dordrecht, Buitenmere Almere Phase 2. France - Les Arcades Rougé, Cholet. United Kingdom - Southgate, Bath. Czech Republic - Forum Liberec phase 2. Portugal - Forum Sintra. Turkey - Marmara Forum, Istanbul and Forum Kayseri.

14 new city hearts 14 great new places. See : www.multi.eu

CORP_AD_Europe_213x276.indd 1 25-2-2010 10:34:34

HoCHtIEF’S MarCo polo toWEr Up For MIpIM aWarD

Hamburg’s Marco Polo tower, developed

by a consortium made up of Hochtief and

DC Residential, has been nominated for

the MIPIM Awards 2010 in the Residential

Developments category. The luxury

apartment block, 56 metres high and

with 15 residential floors, already won the

Best High Rise Development Germany

prize in late 2009 at the European Resi-

dential Property Awards.

pIE CovEr INtErvIEWS

QiREF partner Giacomo Morri, professor of real estate at Milan’s SDA Bocconi University and PIE cooperation partner in Italy, said the

move combines competence in public sector advisory and in real estate to provide a platform for urban re-development projects of all kinds. “We think there is a growing market for social housing in Italy but to do that competences are needed both in real estate and in public-private partnerships, PPP,” he told PIE. “The idea is that the new EPF will be able to meet both re-quirements.” Europrogetti & Finanza, founded in 1995, was bought from the Italian state-owned finan-cial institution Cassa Depositi e Prestiti and some of the largest Italian banks.

Stefano Guerzoni, chairman of the new group, said the acquisition underlines a partial change with respect to QiREF’s original mission. “The company will re-main true to its original aim of being a local partner for international players investing in Italian real estate, but the merger also broadens its capabilities to provide a full range of real estate services in the public sector,” he said. Morri will head the real estate division, extending the activities of QiREF in advisory as well as asset and development management. Andrea Silipo, CEO of the old EPF, heads advisory on technical-financial services and real estate management for public admin-istrations. This includes urban planning and develop-ment, public-private ventures, identification of Euro-pean, national and regional funds, infrastructure and public works financing, and energy saving plans.

Uberto Visconti, EPF strategic advisor for social housing, says social and student housing are perfect sectors for achieving synergies between public and pri-vate sectors. “In Italy there is a strong need for afforda-ble housing as already developed in most other Euro-pean countries such as the Netherlands,” he says. “The role of EPF will mainly focus on producing business models and concepts that are sustainable within eco-

nomic, financial and social aspects precisely to meet both sides’ requirements.” EPF already has a joint ven-ture with the Netherlands-based firm Fakton, which has been providing consultancy to housing corpora-tions since 1995. With offices in Milan and Rome, EPF has also recently been joined by Jean Marc De-shaires, former CEO of Icade Italia, a firm specialised in student housing. As well, Arcotecnica, an independ-ent group operating over the last 30 years in property management, technical due diligence and project man-agement, has on hand more than 50 professionals to provide its services as needed in upcoming projects.

Morri says PPP is likely to expand in Italy because of the existence of a large stock of state-owned real estate that needs re-development even while government budg-ets are constrained. But he says: “This is not always easy to achieve because cooperation is needed between the public sector and private investors and they usually speak two different languages in terms of ideas and internal objectives.” The need for cooperation extends from the central government in Rome down to local level. “Local municipalities are used to having project finance schemes but we see this need coming also at central government level… For example Cassa Depositi e Prestiti, the main entity earning income from the postal service, is setting up its own SGR management company to invest in funds for local developments, including social housing.” It also aims to launch a fund of funds. EPF is currently working on development and requalification with a fo-cus on distressed situations such as non-performing loans, and is in the process of analysing other portfolios. “We are currently advising on a re-development propos-al for an area close to Milan. In this case we are not acting as asset managers but have been appointed by the public entity that owns this area, which is polluted, and wants to develop it. They have asked us to identify the highest and best use for the site, and later help put together a consortium of private investors.” pie



arnaud Dewachter, Managing Director of the French property funds association ASPIM, says roughly 80 institutional OPCIs (Organ-

isme de Placement Collectif Immobilier) exist but only four have been launched for private savers, with another one on the drawing board. The French finan-cial market supervisory AMF (Autorité des marchés financiers) has stipulated that mutual OPCIs must hold a minimum 35% in liquidity to be able to serve redemptions at any time. “We are thinking about how to raise the proportion of maximum property assets,” Dewachter told PIE in an interview. “The AMF says maybe there should be more property al-lowed in OPCIs but on the other hand it has ensured there is a new liquidity ceiling to avoid the German scenario of sudden closures. We want to avoid that at all costs. The German community can live with this perhaps, since the product there has existed for 40 years but OPCI property fund products are new and the authorities here would halt this immediately if companies suddenly had to close for redemptions.”

The institutional OPCIs, so-called OPCI RFA or ‘light-regulation’, have been boosted by adjustments to French legislation that allows them to benefit from seller savings through a halved exit tax on capital gains compared to the acquisition cost. This ruling is effective through to end 2011. “This is a determinant element in the growth of our sector,” says Dewachter. “Thanks to this legislative change there is a lot of trading and selling going on right now. You must keep in mind that while the creation of the SIICs (Sociétés d’Investissements Immobiliers Cotées) was a significant fiscal change of regime for property companies that were already exchange listed, the OPCI is a completely new product that did not exist before, so it takes time.” In the interests of equal treatment for private investors as for institutions, France has provided OPCIs with parallel tax frame-work to REIT/SIICs; there is no corporate tax as long as dividend payouts are held at 85% of operat-ing profits and 50% of capital gains. With capitalisa-tion of all OPCIs at around €7bn now, “I could see the sector reaching perhaps more than €10bn by the end of 2011,” Dewachter says. He notes that the

value of their certificates fluctu-ates closely with direct property valuations and is unaffected by moves in the broad stock market represented by the CAC 40.

Turning to the older form of French property funds, SCPIs (Sociétés Civiles de Placement Immobilier), Dewachter said the success of the fiscal framework championed by parliamentarian Francois Scellier has vastly in-creased take-up by private inves-tors since they invest exclusively in new buy-to-let housing. Their creation has therefore boosted the domestic residential market – precisely the aim of the legisla-tion. French SCPI funds saw net capital inflows of €869m last year, boosting total capitalisation, including valuation changes, by 10% to just under €19bn. Inflows into residential SCPIs, mainly Scellier funds, tripled to a record €490m while inflows to regular SCPIs fell nearly 50%. “The year 2009 confirmed the intrinsic qualities of SCPIs which offer an optimal access to property invest-ment,” commented ASPIM President Patrick de Lataillade separately. SCPIs offered an average yield of 6.05% last year, up from 5.74%. Around 134 SCPIs existed at year end, managed by a community of 22 companies.

“SCPI Scellier are obliged to invest in development for new residential building, new housing and con-struction to support the effort that the state is mak-ing to support housing the sector Dewachter says. “They can only do that; they are not allowed to do anything else.” The fiscal format allows investors to deduct 25% of the value invested from their taxable income over a nine-year period – a construction sim-ilar to that implemented in Germany after re-unifica-tion in the early 1990s to encourage housing invest-ment in the eastern part of the nation. ASPIM is expecting inflows into the Scellier SCPIs this year to be even stronger, between €530m and €615m. pie


New Europrogetti & Finanza supports Italy’sopening to public-private partnerships

French OpCIs seen expanding to €10bn, may cut 65% cap if German problem is avoided

Italy is becoming more open to accept-ing private capital in public projects and to catch this trend the Milan-based QiREF has acquired, alongside the Arcotecnica group, part of the state-owned Europrogetti & Finanza to advise on this, with stress on social housing.

French OPCI open-end property funds should grow soon to €8bn, and may boost attractiveness to private savers by cutting the 65% property cap if authorities are satis-fied this will not spark liquidity crises and closures as in Germany, says a top official.

Arnaud Dewachter, MD of French property funds association ASPIM: Au-

thorities would halt OPCIs immediately if companies

suddenly closed for re-demptions, as in Germany.

The management team of the new Europrogetti & Finanza are (left to right) Uberto Visconti, Cristian Ronchi, Stefano Guerzoni (chairman), Giacomo Morri and Davide Viganò.


He told PIE that Hamborner stock has been traded for nearly 60 years and the listing un-der the REITs segment of the Deutsche

Börse raises no additional capital. “We are very pleased that we can give the German REIT segment a fresh impulse,” he said in an interview. “In fact we have been listed since 1953 so this is for us, so to speak, a second IPO.” The group started life as a min-ing company and is now majority controlled by the

real estate subsidiary of Hamburg landesbank central savings bank HSH Nordbank.

Mrotzek said the state of commercial real es-tate markets, post crisis, means the time is right for REIT listing – and also expansion. “We think prices in various property assets are rea-sonable right now. We see more quality and

more supply coming onto the market and this year we want to invest around €150m. We can do this because we are financially well positioned on the balance sheet. We have a REIT equity quota of 67% and so we can leverage the portfolio some more to acquire real estate assets. We also have a lot of assets that are unencum-bered, and we could raise further debt for more acqui-sitions against these if we wanted.” Hamborner owns 58 property assets in 41 locations mainly in the Ruhr region of north Germany, focusing on retail and of-fice. Last month bought an asset in the German city of Erlangen for €15m. “We are currently checking around €100m in potential acquisitions, even though we are far away from a decision on any of this… Still this year we should be able to make a range of pur-chases,” Mrotzek said.

Hamborner converts into a G-REIT just 29 months after the first, alstria office and Fair Value, opened the sector just after German legislation for the tax efficient pass-through vehicles became effec-tive in July 2007. With a portfolio valued at €314m

its plans to deploy €150m in liquidity should, with leverage, boost it above €500m this year. Decisions on the 53% stake owned by HSH RE, are ultimately made by HSH Nordbank, and the latter is struggling with bad loans in the aftermath of the global crisis, and specialists say that the need of the parent bank group for cash means this is likely to be reduced if the share performs well.

At REIT debut, the group posted preliminary funds from operations for 2009 up 13% at €0.42 per share. Leasing income rose by 13.7% to €22.4m due to further acquisitions. Its average portfolio vacancy rate held at a low 3.5%; net profit for 2009 was just in positive at €5.1m, down from €17.3m in 2008. However last year was characterised by high profits due to sales, and 2009 earnings are not comparable, Hamborner said. After external valuation of the port-folio, its net asset value fell by 2% to €10.37 per share which compared to its price at first REIT listing around €8.50. Hamborner has a cash balance of €38m, a loan-to-value of 34.3% and an equity ratio of 67.1% , significantly above the 45% required un-der the German REIT Act.

“This listing should raise our visibility are make us much more interesting for international inves-tors,” Mrotzek told PIE. “Whether it is pension or insurance groups or foreign investors, depending on what they are looking for, we should tap into addi-tional investors and I expect this to give a slight push on the stock price… We have been making roadshows for two years now, in London and other centres and have been present on all major property conferences. Institutions know what a REIT is and foreign investors are even more acquainted with this vehicle than instititions in Germany. We have one disadvantage and that is the liquidity of the share. We are still a relatively small company with market cap under €200m – at around €190m at the mo-ment. However, this is unlikely to prove very sig-nificant as long as we do our jobs well going for-ward.” Mrotzek and co-director Hans Richard Schmitz regard themselves as well equipped for fur-ther growth. The group releases final figures in late March. pie


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Focused on the Future of Real Estate

Third German REIT Hamborner aims at active portfolio expansion this yearDuisburg’s Hamborner, which late last month became Germany’s third Real Estate Investment Trust, aims to expand its €314m portfolio this year. It is already seeking assets to deploy €150m in available funds, says board member Rüdiger Mrotzek.

Hamborner board member Rüdiger Mrotzek: “We have been listed since 1953 so this is for us, so to speak, a sec-ond IPO - but with no cash raising.”


the company is backed by GI Partners, a trans-Atlantic pri-vate equity group that has al-

ready successfully funded two other specialist work-out companies. “What makes us a little bit different is, firstly, that we’re German – we have no pre-tensions to being pan-European - and that it’s really about looking at the real estate industry in a vertical sense,” says Keith Fischer, one of the Elystan prin-cipals. “We’re capable of taking advan-tage of opportunities all the way from a acquiring a piece of a small mortgage bank or an entire mortgage bank, to running down performing or non-performing loans and mortgage back

securities, or hard real estate assets,” he told PIE in an interview. Apart from the funding advantages that a German banking licence might bring, he also sees a need in Germany for a ‘virgn’ mortgage bank which can do new business, refinance portfolios, and refi-nance developers as their loans come due.

Other Elystan founders are Robert Grassinger, former Hypo Real Estate board member, and former investment banker Ulrich Kastner. The group points to work done in NPLs in Germany over the last eight years by the Houston-based Lone Star Funds. “We at Elystan look at this crisis right now as still primarily a banking crisis,” Fischer says. “Obviously the real estate industry is in terrible shape, values have moved out by 15% to 20% in some instances... But the greater dislocation is in the banking industry itself. We see the crisis moving from distressed banks to the sell-off of distressed portfolios in six to 12 months’ time. We think it will really pick up in the second half, or potentially early in 2011 simply be-cause the banks haven’t sorted themselves out yet. I think in the second half of this year we’ll see the first of what I would call ‘transfer of assets’ from banks to the private sector.”

The recent outplacing into a so-called ‘bad bank’ of €260bn of distressed real estate assets by the former HRE, now Deutsche Pfandbriefbank, has highlight-

ed the extent of NPLs still on German bank books. The challenge has accelerated structural changes most strongly in the savings bank system where state poli-ticians and financial sector officials are manoeuvering to shrink the seven landesbanks to three or four, and sanitise balance sheets. In the two years since the glo-bal crisis struck, many public and private sector insti-tutions have failed to write off large swathes of bad assets due to the lack of equity capital. Others hesi-tated, anticipating valuation recoveries.

Elystan means to deploy a minimum €100m of eq-uity this year and next, and maybe double that in total. “There are really two issues here,” Fischer says. “German banks do not have the workout depart-ments - the staff on hand to sort out the problems on their own... And banks tend to take a nuanced view of their sponsors, the asset owners. Some banks will go to great lengths to work with existing sponsors to avoid having to take back the assets. Then there are others where banks lose patience. There, the bank will simply say call this loan because it expects the assets to be less valuable a year from now if they don’t change the sponsor. Those situations are particularly interesting for us; we view ourselves as a potential bank partner to step in and replace the borrower.”

Two or three deals have taken place in this manner, well out of public gaze and without calling in any big-name brokers, he says. A fourth is now taking place. In these cases, banks take a charge on the special pur-pose vehicle that is the final owner of the assets which enables them to dilute the sponsor to a minimum of equity voting rights, assign ownership to a new owner, and avoid legal complications. The HRE ‘bad bank’ is not necessarily a priority potential client for Elystan, Fischer says, but will eventually need to sell assets too. “We can buy performing loans as well but right now we’re more interested in NPLs... loans that have liter-ally been terminated and where it’s simply a matter of getting at the collateral and going through what is, in Germany anyway, a 12 to 18-month process to reach a foreclosure. Some of this is really granular stuff: there are NPLs out there which are legacy assets going back to the days just after reunification - really loans vintage 1994, 95, 96.” pie


Munich’s Elystan targets €250m at German banks’ distressed property assets this yearGerman banks are likely to start selling non-performing property assets this year that they have not been willing or able to divest earlier in the financial crisis, and new Munich invest-ment firm Elystan Capital Advisers is targeting over €100m of equity at the opportunity.

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Elystan Capital Advisers principal Keith Fischer: “In the second half of this year we’ll see the first ‘transfer of assets’ from banks to the pri-vate sector.”


Many specialists see the French listed sector, with

a mass of mid- and small-caps, as ripe for consolida-tion in light of the drop in asset values amid the finan-cial crisis and their ineffi-ciencies of large adminis-trative infrastructures in relation to portfolio size. But Dumortier says the main obstacle preventing this in the short term may

be finance: banks continue to be hesitant on extend-ing new funds for such moves. The merger of the Morgan Stanley-controlled REIT/SIIC Lucette into the larger group Icade late last year was an exception, he says. MS needed to cut its 90%-plus stake in Lu-cette to meet the SIIC cap at 60% on single-share-holder holdings. He sees the merger solution as good for Paris. “The most difficult aspect for any consoli-dation is financing and the different situations in various companies and the size of their outstanding bank loans,” Dumortier told PIE in an interview. “Some consolidation will come in the sector but not as quickly as people might expect.”

One arena likely to see movement is the unwind-ing by Spanish property firms of French REITs stakes, mostly built in the middle of the last decade. Due to problems that Spanish firms themselves face, bank creditors now hold substantial equity, which cannot be considered long term. “Everybody knows that two or three of those firms with Spanish share-holders will change at some stage, probably not in 2010 but a little later,” he says. “It will undoubtedly take time to reach agreement on share prices, but it will come inevitably, probably before 2012.” By con-trast, consolidation in mid- and small-caps will be a long process, also because managers are not ready to cede their positions.

“The entire listed sector in France has come through the crisis relatively easily,” Dumortier notes. “Until now you have had no capital increases at all of the

kind that we have seen in the UK, for example.” He sees the financial and equity markets re-opening as economies pick up and firms become more confident after the shock of the global crisis. “I would not be surprised if we see three or four equity increases early this year,” he says. “Investor are ready if you offer them a reasonable discount – and this was not the case three or four months ago… We see an increasing interest, providing of course that in property compa-nies distribute a reasonable dividend; between, say, 5% and 7% it becomes interesting for institutions.” While corporate bonds were attractive a few months ago, prices have risen so equity is now back on the investment agenda of major institutions. On average, discounts of French REIT/SIICs to their net asset value have closed almost completely, with only small-er caps showing NAV gaps up to 15% or so.

Because of major stakes by insurance firms in French listed real estate, the Solvency II issue is more critical in France than in many other property juris-dictions. FSIF has been studying the issue through most of last year, also cooperating with the European public real estate association EPRA (See elsewhere in PIE 156). At base, the Committee of European In-surance and Occupational Pensions Supervisors (CEIOPS) is proposing that listed property firms be considered within insurance groups’ equity holdings - requiring capital provision of up to 45% of the stakes’ value – and not as direct real estate, attracting 25%. If the proposal is adopted, the real cost of in-vestment by insurors in listed vehicles will rise sub-stantially – while listed property firms will be at a severe cost disadvantage in their capital raising.

Dumortier says the issue remains undecided but he is hopeful. FSIF has produced a paper that shows listed real over the longer term with a high correla-tion with direct property values, and not tracking industrial equities. “We don’t know for sure what will be the equity proportion required for different asset classes, even if the initial indications were the 40% or 45% of treatment as equities,” he says. “But we are optimistic that we will obtain the assimilation of listed property firms into the same treatment as di-rect investments.” pie


French REITs to tap equity markets as sector tries to defuse Solvency II Three or four larger-cap French REITs are likely to come to market with rights issues in early 2010, says the president of listed property association FSIF. Jean-Paul Dumortier is also hopeful Solvency II will not impact insurer investment in member firms.

FSIF’s Jean-Paul Dumortier, also founder and chairman of Foncière Paris France: “Some consolidation will come but not as quickly as people might expect.”


the European Public Real Estate Associa-tion numbers among its membership most major European stock exchange-quoted firms – some 200 institutions managing €250bn of assets. It is down

from a peak of nearly 220 in mid-decade. Many firms in east Europe and Russia were forced to pull back. However, the growing body of information and guidance for listed real estate that the Brussels-based association now produces is boosting the at-tractiveness of institutional membership, which costs around €10,000. “Considering the seriousness of this crisis, the membership level has done ex-tremely well,” EPRA Chief Executive Philip Charls told PIE in an interview. “In fact, we are now getting new members at a steady pace.” EPRA is also getting membership interest from outside Europe because it has widened its scope. “The value of our output is such that we attract attention,” Charls says. “We had some members at the start of last year crossing off memberships when a lot of red ink was spilt. But then people within the organisation would start missing it and we were back in business in a couple of months.”

Charls does not see the listed property sell-off to 60% and 70% below net asset value at the depths of the crisis as causing long-term damage. “I don’t have any indication that people say, ‘Okay, this brings so much volatility in my portfolio with regard to valu-ation or in the behaviour of my stock that I’m not going to approach that market’,” he says. More port-folios are being readied for flotation, but much will depend on short-term stock market performance. In markets such as Spain, banks have taken over large swathes of real estate and may use stock market IPOs to sell at least some equity.

EPRA has most publicly been involved recently with a lobby to head off the London-based Interna-tional Accounting Standards Board re-setting ac-countancy rules. In a loose alliance called the Real Estate Equities Securities Association (REESA) which includes America’s NAREIT, The Property Council of Australia, Asian Public Real Estate Association and the British Property Federation, EPRA led resistance to IASB plans to require valuations and rental in-come to be removed from balance sheets and reclassi-fied as financial assets. EPRA Director of Finance Gareth Lewis described the move as a potential shockwave. He told PIE the issue now awaits a de-finitive decision around the end of this month from the IASB and the Financial Stability Board, housed in the Basel-based Bank for International Settle-ments. But he added: “We’re very hopeful. There are still some board members, both at the IASB and FSB, who are opposed in principle to excluding a particu-lar sector from new leasing rules… But it simply isn’t appropriate for investment property and we’re just trying to address a few specific arguments to make that clear… EPRA has led on this issue because it is such a big issue for European property firms.” EPRA members were very concerned.

Another relatively recent initiative has been the release, by a team led by EPRA Research Head Fra-ser Hughes, of data series on net asset value across Europe. These now allow comparisons of latest port-folio valuations with share prices, tracking the indi-ces that EPRA produces in concert with NAREIT and the UK’s FTSE. “We now cover all companies in the European part of the index - the European part


including the UK, in total around about 80 com-panies,” Hughes told PIE. “We do a number of different splits that directly mirror indices we run with FTSE. So for example we run a UK NAV index, we run a Europe ex-UK index, and we do Europe with UK and ex-UK pooled together. We also break that down into sectors and split it down between REITs and non-REITs. You can really slice and dice the European market as you like.” Tying in with its work on best practice, it is en-couraging all European property firms to produce an EPRA-based NAV and an EPRA triple-net NAV to allow direct comparisons across firms, sectors and countries.

EPRA has achieved wide implementation of best practice recommendations, produced annu-ally by a Reporting and Accounting Committee, and is shifting now to streamline these. “We’re fo-cusing much more on industry indicators like NAVs, yield definitions, EPRA earnings,” Lewis says. “We want to persuade companies to get more consistency.” Some 95% of firms within the index, now report property at fair value even though this is not required. Most now report either the EPRA NAV or EPRA earnings. But he admits this is still far from broad coverage.

Standardising European Union REIT legislation – an issue that in the past generated heated discussion – remains on EPRA’s radar screen as it deepens talks on various topics with the newly-inaugurated Europe-an Commission. Its ap-proach focuses on encour-aging governments to bring through REIT fiscal legisla-tion, and to improve re-gimes that already exist. Says Lewis: “We’re making progress; we’re responding to requests for information on REITs, and the approach we’re taking, and very much the approach the Commis-sion has suggested we take, is to look at how we can educate member states on the benefits that REITs can bring to their econo-mies… what REITs deliver on the ground, the actual tax contributions they make to states via the collec-tion of the constant distribution of dividends.”

At the time of Spain’s introduction of REIT/SO-CIMIs last year EPRA issued a statement critical of Madrid’s 15% corporate tax since this one element distinguishes REITs in all other European jurisdic-tions. Says Charls: “Referring to the Spanish SOCIMI as a REIT-type regime is, in our view, unhelpful be-cause we’re talking to organisations like the EC and global investors about the European REIT market and what it means to invest in that market, and you’ve got a confusing picture being presented. Comparabil-

ity and transparency always come high on analysts’ lists of needs.” Adds Lewis: “From a perception point of view, institutions and pension funds are turned off by seeing a vehicle that has tax that they can do ab-solutely nothing about be-cause it’s applied at the cor-porate level.” One issue particularly relevant in France (see elsewhere in PIE 156) is the potential introduction of new insur-ance equity rules known as Solvency II. These propose

treating listed real estate as industrial stocks, requiring a higher equity capital reserve than direct property holdings. This threatens to make listed real estate in-vestments more expensive for insurance groups. pie


Enthusiasm for listed property to hold stable despite crisis sell-offThe massive sell-off in listed European real estate amid the global financial crisis has not dimmed investor enthusiasm for the sector or the willingness of compa-nies to bring property portfolios to the stock market, say top officials of EPRA.

EPRA CEO Philip Charls (above) and Finance

Director Gareth Lewis (top left): Current work-load includes talks with

the EC on REITs, Sol-vency II, and with IASB,

FSB on accounting rules.

EPRA Research Head Fraser Hughes: En-couraging Europe’s listed property to produce a standard-ised triple-net NAV

“Referring to Spanish

SOCIMIs as a REIT-type

regime is unhelpful .. and

gives a confusing picture.

Comparability is always

high on analysts’ lists”

EpRA CEO philip Charls

lIStED rEal EStatE

Writedowns push French Gecina into €774m loss Gecina, one of France’s largest REITs/SIICs, posted a 2009 net loss of €774m as a result of property portfolio depreciations of €871m, but recurring in-come rose 16.8%.

The value of its portfolio of office, residential, logis-tics and healthcare assets declined to €11.3bn from €12.2bn. In addition to an adjustment for fair value, the decline also reflected asset sales of €756m, above the group’s initial target of €600m-€700m. New CEO Christophe Clamageran said Gecina sold at market value or more despite the difficult environment. In-vestments totalled €503m, including an increased stake in its Gecimed unit and the €109m acquisition of a 49% stake in Spanish company Bami, owned by former Gecina chairman and CEO Joaquin Rivero and long-time ally Juan Bautista Soler. Chairman Ber-nard Michel said Gecina is now focusing on business development after being riven by disputes between shareholders during the reign of Rivero, who stepped down as chairman last month after being replaced as CEO in November (see elsewhere in PIE 156).

Clamageran made no specific forecast for 2010 but said Gecina has solid assets on which it can build. In the office sector some 90% are in Paris and it has an occupancy rate of 96%. In residential it stands to benefit from the gap between growing de-mand and limited supply in Ile-de-France. And in healthcare, where its Gecimed unit is market leader, the group is also well placed to benefit from increas-ing demand for new buildings.

Gecina’s rental income grew 1.6% to €647m in 2009. Recurring income rose 16.8% to €348m and diluted net asset value fell to €6.3bn from €7.9bn, equating to €100.80 per share compared with €128.30 a year earlier. Finance director Michel Gay said this needs to be seen in the context of a property market in which end-2009 is likely to mark the low point of the cycle. The company is proposing a divi-dend of €4.40 a share compared with €5.70 the year before. Net debt was €4.8bn at end-2009, barely changed, but the debt ratio rose to 45.7%. pie

Unibail-Rodamco sees better 2010 after lossFrench-Dutch REIT Unibail-Rodamco, the largest listed property company in Europe, posted a 7% rise in recurring earnings per share in 2009 but a wider net loss of €1.47bn, against €1.12bn in 2008. It marked the portfolio down another 2.7% from June to €22.3bn, having made €2.3bn in valuation move-ments and disposals over the year.

Fully diluted net asset value ended 2009 15% low-er at €128.20. “The group ends 2009 with solid earn-ings growth in line with expectations, despite a very adverse economic environment,” said CEO Guil-laume Poitrinal. U-R will maintain its distribution of 87% of recurring net earnings, will propose a €8.00 per share dividend to be paid in full on 10 May 2010, and sees a better 2010. “While 2010 starts with tan-gible signs of recovery, it will be a year of transition, with low or even negative indexation, the impact from divestments achieved in 2009, and limited de-liveries of new assets in 2010,” the group said in a statement. Guidance for recurring EPS growth in 2010 is 0% to 2%. “Beyond 2010, the group expects to see renewed momentum for growth based on the growing appeal of its large centres and delivery of projects from the €5.6bn development pipeline.”

The slide in NAV over 2009 was almost entirely due to property yield expansion, and mostly concen-trated in the first half. U-R is carrying relatively little debt. Its loan to value ratio stood at 32% at year-end, in spite of the 9.8% like for like decrease in gross market value of the portfolio. The group relied on a variety of funding sources last year, raising €2.1bn from bank, convertible bond and bond markets and €700m of additional liquidity from disposals. pie (Story first published in PIE 153 on 15 February)

PIE COMMENT: A very mixed bag but on balance a positive message from a bellwether certainly for the shopping centre industry but also, due to its size, for ph

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Unibail-Rodamco: 7% rise in earnings per share but a net loss of €1.47bn against €1.12bn loss in 2008. It marked the portfolio down 2.7% from June to €22.3bn. NAV fell 15%.

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office assets in France. The group has been largely ap-plauded for its opportune move into the Simon Ivanhoe portfolio, particular giving further exposure in Poland, now seen as one of the strongest short- and medium-term markets in CEE.

CA Immo targets €500m for German expansionVienna-based listed property group CA Immo has up to €500m available for investment this year and is fo-cusing on expanding in Germany by taking over smaller firms, portfolios or leased properties to en-hance rental income, say its top officials.

CEO Bruno Ettenauer and CFO Wolfhard Fromwald told a news conference that the issuance of a convertible bond last year raised nearly €270m in fresh capital to bring total liquidity on balance sheet to some €500m. This compares with its €3.7bn portfolio, including its German Vivico unit acquired two years ago, and concentrated on Germany, Aus-tria and central and eastern Europe. “We are actively looking for opportunities in the market, concentrat-ing on our day-to-day business where we find com-petence that we can use and integrate,” Ettenauer said. “This would be firms in the main, not individ-ual projects.”

Fromwald said CA stock, trading on the exchange at less than half its net asset value of nearly €18, has been affected by turbulence in Austrian listed real es-tate in general, which has left Vienna property firms with a poor reputation. In addition, CA’s develop-ments, worth about €1bn, are inadequately rated by investors. Its stock was last trading at just over €7.

The group also said it will use its project pipeline to build assets. Germany will be the driving force of the strategy which will build on high added value from development, and on freeing reserves in Vivico. CA currently has some 400,000 sq.m. of gross area under construction, and aims to raise its area provided with planning permission to 1.6m sq.m. by 2014. “We are one of the few project developers able to realise our plans continuously in Germany,” Ettenauer noted. “We are deliberately using counter-cyclical invest-ments! From 2011 onwards, we will be bringing high-quality space onto the market at a time when the economy should be rising again and demand for office space increasing.” pie

PIE COMMENT: CA Immo can justifiably be frustrat-ed at the large discount of its share price. Its free float is high, around 90%. Vivico, a former railway-controlled firm with significant land rights in city centres near rail hubs, presents significant opportunities. Tower I85 in downtown Frankfurt should be ready by end-2010, and is two-thirds pre-let to PwC.

French FdR narrows net loss, recurring result rises 7%One of the largest French REIT/SIICs Foncière des Régions more than halved its net loss in 2009 to €262m, with the shortfall caused solely by a further writedown in its portfolio of €332m, while net recur-ring income rose nearly 7% to €304m.

The group is maintaining an active distribution poli-cy, and for 2009 is proposing up to €6.9 per share, with €3.3 in cash plus six shares of Italian unit Beni Stabili.

CEO Christophe Kullmann said FdR has set growth in net recurring income as the goal this year. “After 10 years of growth and the good re-sistance of its business mod-el in 2009, Foncière des Ré-gions wishes to consolidate its position focused on com-mercial real estate and large clients,” he said.

FdR was caught at the start of the crisis with a comparatively high debt load. It cut debt last year by €1bn to reduce loan to value to 55.6% from 58.8% at end-2008. “The objectives of the FdR 2010


plan, a plan initiated on January 2009 to respond to a deteriorated economic and financial environment, have been exceeded,” it said. It also conducted active asset management, investing €457m in office in Ile-de-France and making €751m in asset sales - against a target of €500m. The company main indicators are now stable. Net asset value rose 10% from June to €4.01bn - 1.3% over 12 months - for a total group share portfolio of € 9.3bn. NAV per share, excluding transfer taxes and financial instruments, was stable at €79.2. Its stock was trading after the announcement around €75. FdR total assets fell last year to just under €14bn from €17.4bn at end-2008. pie (Full story first published in PIE 154 on 22 February)

proLogis European cuts loss, completes deleveragingProLogis European Properties, a Luxembourg-based listed fund owner of distribution facilities, narrowed its net loss for 2009 to €311m from €578m in 2008, but reported a profit in the fourth quarter, turning round successive losses, and said its deleveraging is completed.

Over 2009, it marked down the portfolio to €2.98bn from €3.76bn at the end of 2008, of which a depreciation of 5.2% came in the second half but only a fractional 0.4% in the fourth quarter alone. Earnings per share, based on July best practice recom-mendations of the European Public Real Estate Asso-ciation, fell to €0.54 from €0.67 in 2008 due to de-creased rental income, onetime CMBS termination costs and the loss of dividends from a fund, PEPF II, which was however partially offset by lower operating and finance expenses. On an IFRS basis, it declared a loss of €1.62, about half the shortfall in 2008.

For 2010 PEPR expects between €0.45 and €0.50 per ordinary unit on EPRA basis, reflecting an in-

crease in finance costs, preferred dividend payments and management assumptions for rental decline and stable occupancy levels for the year.

The group, which has been battling a heavy debt load since the onset of the financial crisis, said it has now refinanced nearly 95% of its €1.3bn in debt ma-turing in 2009 and 2010, and kept its occupancy rate above 96% , with a 76% rate of customer retention. “By addressing our debt maturities and paying down a significant part of outstanding debt, we have success-fully completed our objectives for the year and put PEPR on a firm footing for the future,” commented CEO Peter Cassells. Net asset value at end-2009, EPRA basis, fell 23% to €6.15 and on IFRS basis was down 14% to just under €6. PEPR last year recorded 88 leasing operations across the portfolio, covering 947, 300 sq.m., up from 82 for 661,700 sq.m. pie (Full story first published in PIE 153 on 15February)

PIE COMMENT: 2009 looks like a watershed year for PEPR, and its re-financing should now be adequate to take it through into a much more positive valuation phase for the European logistics market as a whole. It is hard to believe that a firm so well positioned in the product supply chain will not continue to benefit from the ongoing need for its products, particular in eastern, central Europe an on into the Southeast, Russia and Ukraine.

NL mall REIT Corio in €132m lossDutch shopping centre REIT/FBI Corio reported a 2009 net loss of €132m, narrowing the €240m loss from 2008, but saw its direct result rise nearly 7% helped by a climb in rental income. The indirect re-sult saw portfolio depreciations reach 6.3%, contrib-uting to a 2.5% fall in its balance sheet assets to €5.89bn. It is recommending a dividend little changed at €2.65.

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Corporate bondConvertible bondRights issueRights issueOpen Offer + placingEquity PlacingCorporate bondCorporate bondEquity PlacingEquity Placing

Company

European listed real estate, capital raisings 4Q09

Source: LaSalle Investment Management, Bloomberg

Country Date Price, orbond yield

Grossproceeds Type

CofinimmoCA ImmoQuintainGraingerInvista European RE TrustEurocommercial PropertiesSegroCityconWorkspaceMWB Group HoldingsAverage/Total 4Q09Total Public Capital raised in 2009

BelgiumAUUKUKUKNLUKFIUKUK

22.10.200904.11.200905.11.200905.11.200916.11.200917.11.200917.11.200930.11.200908.12.200917.12.2009

4.54%11.58 (conv price)0.490.90.2, (1 per Pref. share)27.56.75%/ 12 years5.1%/ 5 years0.190.3

100135213279

6699

33940

21.331

€ 132€ 1323

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“After a disastrous year in the financial markets in 2008, 2009 was the year of the aftermath,” said CEO Gerard Groener. “Amid widespread corporate restruc-turing, Corio maintained a firm course and showed great resilience throughout the year. A major focus for us, as with all companies, was our balance sheet and the need to secure our own longer term funding at sustainable rates. Even for highly respected companies like Corio this was a challenge as the availability of funding in the market shrank to near zero and any fi-nancing that could be obtained came at a high price. Funding growth and securing redemption schemes took up a good deal of management time.” Like-for-like growth in net rental income for retail was 1.7%. It said its average occupancy rate for the total portfolio was 96.2% in 2009, down slight from 96.8%. pie

PIE COMMENT: Corio seems to be through most of its funding challenges, even if Groener does not say as much. Capital markets are loosening so that a wider range of funding options is open, including attracting equity from cash-rich Dutch pension institutions. Given Co-rio’s difficulties in Turkey and Multi’s massive program of investment and pipeline there, it seems the latter is moving the emphasis away from some western Europe – notably the hotly contested German segment - and look-ing toward high growth nations in the south.

Berlin GSW housing IpO held up by SenateWhat could potentially be the largest real estate stock market flotation in Germany for several years, the 52,000-unit GSW housing portfolio in Berlin, hangs in the balance as discussions continue between the owners, private equity group Cerberus and Goldman Sachs Whitehall funds, and the city’s Senate which needs to approve the move.

The Handelsblatt newspaper reported that discus-sions are ongoing about a potential IPO of the port-folio, sought by the owners, and no decision has been made. Since Berlin is run by a coalition of the centre-left Social Democrats and the hard-left Linke party – and left-wing opposition to the stock market flotation of residential portfolios kept these out of eligible REIT assets three years ago – approval of the move remains highly uncertain.

Failing a full flotation, the owners have three op-tions, writes the newspaper: First, they could float less than 49% on the exchange, which may assuage Berlin city-state concerns but would dampen investor inter-est; secondly, the owners could delay until 2014 when Berlin’s contractual veto rights expire; thirdly, they

could merge the portfolio into another group. The privately-held Deutsche Annington, and listed Deut-sche Wohnen have both shown interest. pie (Full story first published in PIE 153 on 15 February

PIE COMMENT: It is unlikely that the Berlin coalition is in a position to approve this flotation, given its political colour under Mayor Klaus Wowereit –deputy chairman of the SPD and an ambitious politician. The property community in Germany is however looking for just such a bellwether flotation, hoping it will encourage more portfolios to come to market and boost the traded sector. Annington is at times speculated to be among them. Giv-en its owner Terra Firma’s problems with EMI, new capital from whatever source would be welcome.

Controversial IVG investor says ready to raise stakeOne of the largest private investors in the Bonn-based IVG, the controversial Clemens Vedder, with a repu-tation as a corporate raider, says he is prepared to raise his stake but only if Supervisory Board Chair-man Detlef Bierbaum and board colleague Matthias Graf von Krockow, former head of the collapsed Sal. Oppenheim bank, step down.

In a recent interview with the Handelsblatt news-paper, Vedder, who with partners holds around 4.6% of IVG equity, expressed scepticism about the strate-gy of Oppenheim, which has announced its inten-tion to sell its IVG stake, now at 18.4%. The family-controlled Cologne investment bank, which has ran into difficulties in the global financial crisis, is being taken over by Deutsche Bank. Its IVG stake had been taken into an arm’s-length holding.

Asked it he would raise his IVG stake, Vedder told the newspaper: “Absolutely. There are several reasons for this, and I can name three: The new management board has begun a new cost offensive, brought a mark-edly better building quality of the portfolio assets, and has a proportion of around 15% invested abroad.” However he said von Krockow, a former Oppenheim head, and Bierbaum must first leave IVG, in particu-lar in the aftermath of what he called the “Oppenheim disaster”. IVG is Germany’s largest listed real estate company by assets, managing a portfolio worth €22.7bn directly and through a funds arm. pie

PIE COMMENT: Vedder has long been a controversial figure in the German corporate scene, taking a stake some 10 years ago in Commerzbank, which he continues to profoundly criticise, with a small investor group he named Cobra. His claims of high profits at the sale of the ph

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Berlin Senate agreement is needed for GSW to IPO its housing portfolio, but the poliltical winds may not be right.

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stake in May 2006 are said by some to be inflated. How-ever, he was the single largest shareholder in IVG in the 1990s and continues to track the company closely. He withdrew from its equity with the deepening involve-ment of Oppenheim in the firm last decade.

Germany’s Fair Value narrows loss, sees value trend upturnThe Munich-based Fair Value REIT recorded a con-solidated 2009 loss of €4.2m, sharply narrowing the shortfall of €13.2m in 2008, and hit mainly by further writedowns on the portfolio and derivatives. Its adjust-ed net income was only slightly lower at €5m, and beat its recent forecast, according to preliminary figures.

Rental income in the Fair Value portfolio, valued at €237m at year end, was €10.5m, down from €12.4m in 2008, and included income from directly owned prop-erty as well as the closed-end real estate funds in which Fair Value held the majority of shares over the year. The rental income drop resulted primarily from the sale of an office building and termination of a general lease contract in return for a compensation payment.

The group, Germany’s second REIT that floated in late 2007, boosted occupancy across its portfolio to 95.5% of potential rent, from 94.9 % at end-2008 as a result of active rental management. The residual term of rental contracts narrowed to 6.3 years from 6.9. With a consolidated balance sheet total of €203m, group equity equalled €71.4m, giving a balance sheet net asset value of €7.64 per each share and of €8.15 calculated on EPRA basis. Its share was last trading around €4.60 on the stock exchange. pie (Full story first published in PIE 155, 1 March)

France’s Icade profit up 69% on disposalsFrench SIIC/REIT Icade posted a 69% rise in 2009 net profit to €527m, but the increase was almost en-tirely due to disposals, with turnover down 5.8% and the property portfolio marked down 10.3%. It is pro-posing an unchanged dividend of €3.25.

Profit from disposals rose to €533m from €296m as the company pursued its strategy of taking capital gains from mature assets and using these funds to make acquisitions. Icade, a subsidiary of state-con-trolled Caisse des Dépots, began the sale of its hous-ing portfolio last year, with the aim of reinvesting in

commercial property at the bottom of the cycle, and by the end of 2010 will have sold more than €2bn of housing units for a yield of about 4%. Disposals were a key factor in a 49% rise in operating profit to €665m, while rents rose 3.4% on a like-for-like basis. EBITDA fell 10% to €302m, with the decline in the contribution of property development only partly offset by improved property investment.

Icade’s portfolio value declined to €5.80bn a fall of 16.5% and 10.3% like-for-like. Net asset value per share fell €17.10 to €84.50 on a liquidation basis and €18.80 to €91 on a replacement basis, compared with a current share price around €72. New acquisition Compagnie la Lucette will also be consolidated into accounts this year. Its assets mainly consist of offices in the Paris Ile-de-France region, and the acquisition means Icade has the second-largest office portfolio in the French listed property investment sector. The group will continue its strategy of moving toward commercial property in 2010. pie

Spain’s Renta halves losses, wins €695m debt refinancing Spanish listed property company Renta Corporación halved net losses in 2009 to €54.5m compared to 2008, mainly achieving this through debt restructur-ing and cost reductions undertaken during the year.

It said sales reached €360m over the year, of which €287m corresponded to transfers of assets to its cred-itors as part of refinancing negotiations. The group drastically reduced investments in 2009 to €18m from €130m in the prior year. Renta, which also has significant holdings in France, recently received ap-proval from banks for refinancing debt amounting to €695m, prior to signature on an agreement in late February to sell €380m of assets including its HQ building to the Catalan Finance Institute and the La Tour la Villete in París to creditor banks Eurohypo and Fortis. pie

Spain’s Reyal Urbis cuts 2009 losses by 83.5% Listed Spanish property investor Reyal Urbis cut net losses last year to €144m from a massive €875m in 2008. The overall profit and loss account also im-proved, with a 98% fall in operating losses to €9.2m compared with losses of €521m in 2008.


At €1bn, group turnover was less than half of 2008’s €2.24bn. The reduction in losses was largely achieved by property sales and staff cuts. The com-pany, which had a portfolio worth €6.3bn at year end, currently employs 758 people down from 931 people at its peak. Reyal Urbis is controlled by Ban-co Santander via its Banesto unit, and is present in over 20 cities across Iberia, focused on residential, commercial property investment, land management and the hotel group Rafaelhoteles. The firm an-nounced in mid-February that it is renegotiating its debt with creditors. Madrid real estate report that it is offering property assets in return for cancelling debt. The amortisation of part of its debt of €4.8bn through asset sales has been one of the pillars of Reyal Urbis’s strategy for a number of months. The firm has outstanding loans with more than 50 banks. pie

Spain’s Metrovacesa refi-nancing talks break downNegotiations between banking shareholders of Spain’s listed residential group Metrovacesa and non-owner

creditors have broken down, which the latter demand-ing a solution to the failure of Metrovacesa to comply with terms of its loan agreements.

In November both sides appeared to be nearing an agreement but talks have now been broken off. Ac-cording to sources among the 40 creditor banks, the two sides are a long way apart and owners have not responded to a proposal they put forward at the start of February.

Shareholder banks were represented in the nego-tiations by Goldman Sachs, with creditor institu-tions represented by Barclays, Royal Bank of Scot-land and Hypo Real Estate. Although no time limit had been set on talks, everything pointed towards a close by end-February, according to PIE sources. A draft agreement covered reduction of operating debt in exchange for shares with a value of between €1.5bn and €1.8bn.

Banks now control 77% of Metrovacesa’s equity following the recent acquisition of share capital of 5.18% by La Caixa and 7% by Barclays following the calling of loans made to former controlling sharehold-er, the Sanahuja family. Spain’s La Caixa savings bank is now demanding a place on the board in order to understand at first hand the precise balance sheet situ-ation of the group. pie

Bernhard MeyerMobile: +33 (0) 6 7139 4008 Email: [email protected]

Steve WhitehouseMobile: +33 (0) 6 1459 2899Email: [email protected]

two pIE appointments turn Spotlight on France

The French property sector is active and increasingly important due to its large asset base and its indirect vehicles which offer international investors a wide range of choices: It has Europe’s biggest and liveliest listed sector, mainly REITs, and a growing community of property funds, including new OPCIs.

PIE is therefore delighted to announce a Spotlight on France with two Paris-based appointments: Business Development Director Bernhard Meyer, and Editor-France Steve Whitehouse. With a background in finance, Mr. Meyer has worked with Deutsche Bank, Morgan Stanley and AT Kearney, and heads his own firm CIFRAL. Mr. Whitehouse, living in France for 20 years, counts spells at Reuters, AFX and Thomson Financial news in his 25 years’ experience in financial journalism.

Join the property Investor Europe publication and events platform. Join the professionals.

Fair Value CEO Frank Schaich: Exceeded operational goals in a difficult market envi-ronment. Valuation loss was cut in half - an indication that we have seen the bottom.

MIpIM aWarDS 2010

What The Augustine in Prague and andel’s Hotel in the Polish town of Łódź have in common are fine refurbishments of historical buildings that fell waste. In

Prague it is an old monastery; in Łódź, a former fac-tory. Both hotels, opened last spring, have already won several prizes. The Augustine, now a luxurious new Rocco Forte Hotel after investment of more than €50m, is named after the former monastery of St Thomas in the medieval heart of Prague’s Lesser Quarter (Malá Strana), a UNESCO World Heritage Site. The monastery and adjacent church were founded in the 13th century. Several times recon-structed and enlarged, they continued to house Au-gustinian monks until confiscated under commu-nism. Restituted after the Velvet Revolution, the buildings were in such poor condition that in 2002 the city condemned them as unsafe; unless owners could ensure upkeep, they would be demolished.

Enter the US-based Waldeck Capital which spe-cialises in hospitality recovery. Together with Vienna-

based developer Raiffeisen Evolution, it decided to refurbish into a hotel. There followed nearly two years of discussions with the Augustinian Order to secure leasehold, after which the scheme needed Na-tional Heritage Institute and City Hall approval. Af-ter archaeology and historical research, it was decided to re-design to accommodate the original features of the monastery including cloisters and courtyards, also restorating over 800 years of art and architecture. The buildings, with a distinct structure and built from diverse materials, had to be integrated into a seamless blend of old and new while remaining true to their heritage. Wherever possible, original con-struction materials were re-used: on the top, attic floor, the roof was raised and original timbers re-stored by Czech craftsmen using traditional methods. Now, each of the 101 guestrooms in The Augustine is different in size and layout; the restaurant, The Mon-astery, is housed in a glass-covered courtyard; one of two bars located on the ground floor has access to the cloister garden. The monastery’s refectory, a barrel-vaulted, double-height hall with re-conditioned ceil-


ing frescoes of cherubs is restored, and The Brewery, now a cellar bar, was long ago just that.

A totally different impression is gained from the andel’s Hotel in Łódź. The only 4-Star hotel in a city of 750,000 inhabitants, the third largest in Poland, it is located in a former weaving mill established in 1878 and part of a great textile factory next to the Old Town once belonging to magnate Izrael Pozn-anski. The building had an eventful history in the 20th century and was closed in 1992. Although in 1971 the city’s historical buildings conservator des-ignated the factory among the four most important monuments in Łódź, it was not until the new mil-lennium that the ‘city in the city’ began to revive in a project known as ‘Manufaktura’ - Europe’s largest urban revitalisation.

When Manufaktura opened its doors in 2006, one building was still more or less empty and neglected: the weaving mill. Now, after four years and invest-ment of €80m, it has been transformed into a mod-ern business hotel by Austrian developer Warimpex and is a shining example of how historic industrial

architecture can blend with modern design. Now op-erated by Vienna International, andel’s Łódź was converted by the Polish-Austrian architect OP Ar-chitekten. It took 2-1/2 years to renovate the red-brick building in line with guidelines for historic structures and to create a modern hotel with 278 rooms and suites and a spacious conference centre. This includes seven flexible conference rooms with total space of 3,100 sq.m., as well as a 1,300-sq.m. glass-enclosed ballroom on the roof. The interior de-sign is the work of the London-based Jestico + Whiles. The firm made sure old pillars and beams were pre-served, and the 100-year-old stairs and cast-iron gate restored – while the new glass roof and skylights make for optimally illuminated public spaces that comply with international standards. The highlight of andel’s Łódź, often mentioned in architectural fea-tures and hotel descriptions, is fantastic views over the city from the pool on the top floor - created out of a 19th century fire water storage tank - as well as from the 1,200-sq.m. fitness club. pie Story by PIE Editor-Russia/CIS Marianne Schulze.


Historic CEE hotels nominated for MIpIM Hotels & Tourism awardsIn more than 20 years since the Iron Curtain fell, former communist countries have moved a great part of the way to catch up western Europe. One sign is that this year two CEE projects have been nominated for the MIPIM Hotels & Tourism awards.

Nominated for a MIPIM 2010 award is The Augustine (above & top left), a new Rocco Forte Hotel, re-created by Waldeck Capital out of the 13th century St Thomas mon-astery in the medieval heart of Prague’s Malá Strana, a UNESCO World Heritage Site.

The andel’s Hotel in Po-land’s Łódź. (above) was created by Austria’s War-

impex out of Manufaktura, a weaving mill dating to 1878. Interior design by

Polish-Austrian architect OP Architekten preserved pil-lars, beams and other fea-tures (restaurant, centre), and created a swimming

pool (top right) with breath-taking views out of a 19th century fire storage tank.

pIE: Where do you see the Golden Tiger’s main challenges for the industry?ER: Real estate private equity fund managers will need to

brace themselves for an uncertain road during the Year of the

Golden Tiger – which last appeared in 1950, decades before

the emergence of global real estate private equity. Now, the

industry has faced two successive years of the toughest fund-

raising environments on record, and in addition to the tight-

ening of capital available for investment in the wake of the

global crisis, the typical co-mingled private equity fund mod-

el is being challenged. Separate accounts, direct deals and

revised fee structures are being imposed by institutional in-

vestors, especially for new funds. As well, uncertainties stem-

ming from the proposed Volcker Rule and other regulatory

initiatives may have a profound impact on how the private

equity industry operates in the future. With nearly 250 real

estate private equity funds fishing in a smaller pool of more

restricted capital, other capital sources will begin to fill the

void. These include private buyers unconstrained by the same

fiduciary obligations, who can move more quickly than fund

investment committees and often have access to local sourc-

es of debt and off-market opportunities.

pIE: Salans spans 22 offices from New york to Shanghai and is an acknowledged legal expert on the world’s emerging real estate markets. How do you weigh emerg-ing versus developing?ER: On a macro level, making real estate investment deci-

sions in the Year of the Golden Tiger will require an extraordi-

nary level of fortitude. There will be a growing divide be-

tween believers in the emerging markets story and investors

intent on moving down the risk curve by focusing on core

products in developed markets with more product and li-

quidity. However, investors in both will face challenges in

finding willing sellers of quality assets, and price expectation

gaps will persist across the globe. A key differentiating factor

is that emerging markets now contribute 70% to global

growth and are set to drive the world economy in a new

world order. For example, Asia-Pacific is forecast to overtake

North America as the world’s largest pool of private wealth

by 2013. This accumulation of wealth will have far-reaching

implications for private equity fundraising and portfolio al-


locations. Overall, Asia’s share of funding increased 5% in

2009 and Emerging Asia received nearly 40% of all new com-

mitments to emerging markets. While the stars are aligning

in favour of Asia (excluding Japan - the world’s most indebt-

ed country) - significant risk and valuation differences exist

between Asian countries and sub-markets.

pIE: What do you think the Tiger will bring in Europe?ER: The recovery from huge drops in real estate sales in

western Europe last year is progressing along two tracks.

Sovereign debt concerns in Greece, Spain, Portugal, Italy

and Ireland have shaken global confidence in the Eurozone.

As a result, a limited supply of prime assets in British, French

and German global financial centres are attracting attention

from a wide range of international cross-border real estate

private equity, pension and sovereign wealth funds. German

funds of course feature prominently. While this is driving

yields lower in some cities, it is also creating pricing anoma-

lies which may not be sustainable through 2010, especially if

the recovery in the UK and Germany falters. Looking beyond

European sovereign debt, the prospects for a broad Euro-

zone real estate recovery will be dogged by persistent high

unemployment, uncertainty over the impact from the end

of quantitative easing, and €781bn of CRE debt on European

bank balance sheets.

pIE: Do you see the same dynamics in central and eastern Europe?ER: The real estate mood there is cautiously upbeat and the

region could prove to be an attractive middle-ground for be-

tween western Europe and CEE’s weaker neighbours. Although

CEE real estate markets are relatively small by global stand-

ards, most have weathered the global recession comparatively

well and have already seen a number of large acquisitions in

2010, especially in retail. Russia, Ukraine and southeastern Eu-

rope, by contrast, experienced a precipitous drop in deal vol-

ume in 2009 and have yet to recover. Russia, in particular, is

now viewed by some conservative cross-border emerging real

estate market investors as the ‘bad boy’ of BRIC, resulting in

private, local-to-local deals and niche Russia funds filling a

portion of the vacuum left by the withdrawal of international

investors and banks. New, non-industrial development is vir-

tually frozen in Russia, especially outside of Moscow.

pIE: What does the year of the Golden Tiger portend in terms of asset types?ER: The outlook is mixed. In the midst of a jobless recovery

businesses are cautious about new investment, and con-

sumer confidence remains subdued. This does not bode well

for office sectors where rents may not have bottomed out

and recovery has not yet brought occupier growth. On the

other hand, global manufacturing is recovering in emerging

and developed countries, and cash rich firms are looking to

expand international operations into new consumer mar-

kets. This indicates that industrial, logistics and retail sectors

are poised for an upturn, especially in developing markets

that have experienced a more pronounced V-shaped

bounce. The luxury end of residential and hospitality seem

to be on a longer road to revival, while low-cost residential

and 2- to 3-Star hotel schemes seem to have promise, espe-

cially in markets in the throes of historic urbanisation and

infrastructure development.

pIE: How do you see prospects for China?ER: China is set to overtake the US, Germany and Japan in

more services and industries, creating jobs, new technologies

and cadres of entrepreneurs that can support future lettings

across multiple real estate sectors. However the Year of the

Tiger brings along a number of inauspicious stars. Extraordi-

nary regional growth in Asia will not necessarily translate into

better real estate values or mitigate against transaction and

operating risks in Asia. Only a handful of international private

equity players have the experience and connections neces-

sary to succeed in China’s complex real estate investment en-

vironment where onshore home-grown funds such as Bo-

Com’s planned $500m private equity fund are participating in

a growing intra-regional network of property capital flows.

pIE: What will the Golden Tiger bring in terms of distressed RE opportunities? ER: The US should remain the undisputed Queen of Distress

in 2010 as it marches down what some pundits describe as

the ‘road to fiscal catastrophe. By contrast, it is hard to see

where or when a significant market for distressed real estate

assets will appear outside of the US, UK, Germany and Japan.

Banks will be constrained by domestic politics, regulations,

legal obstacles and a lack of foreclosure and work-out experi-

ence, forcing them to restructure distressed loans rather than

make wholesale liquidations and forced sales. Should the

Golden Tiger encounter a double-dip recession, the clock

may eventually run out on troubled projects, creating broader

opportunities. Ironically, in an increasingly interconnected

global real estate market, the real estate private equity indus-

try is becoming smaller and more local, with increasing dif-

ferentiation within markets and sectors, and new competition

from domestic investors. pie

Eric Rosedale can be reached at [email protected]



Real estate private equity outlook 2010:

year of the Golden TigerPowerful, volatile and fast, 2010’s Year of the Golden Tiger could bring dramatic and rapid change, according to feng shui masters. Eric Rosedale, co-Chairman Global Real Estate at international law firm Salans, spoke to PIE about what the lunar year holds for real estate private equity.

Salans Global Real Estate co-Chairman Eric Rosedale: Recovery in western Europe is progressing along two tracks.

“Real estate

investment

decisions in

the Year of the

Golden Tiger

will require an

extraordinary

level of

fortitude.”

Eric Rosedale


two top officials of AXA Real Estate In-vestment Management told PIE that across the €38.4bn of assets in over 30 portfolios focused on Europe, the pro-portion of external capital has risen to

nearly 50% from less than 20% at the turn of the millennium. The last 10 years have more than dou-bled the €17bn AUM run in 2000. Jaap van der Bijl, Head of Investor Relations for institutional clients, and Alphons Spaninks, Regional Head of Benelux and Scandinavia, said AXA Real Estate’s cautious ap-proach has gone over well, particularly with pension and insurance groups. Said van der Bijl: “We concen-

trate on core property in the main and offer a wide variety of prod-ucts across anything directly linked to bricks and mortar – from open-end funds, important for the German market for instance, closed-end funds, and also some separate mandates as well as mortgage loans.” Spaninks add-ed: “We definitely ex-pect to see growth of assets under manage-ment this year. I could well imagine acquisi-tions around €2bn to €3bn. This comes from money looking for core or core-plus investments and some opportunistic invest-ments in the main.”

Headed by Paris-based CEO Pierre Vaquier, AXA Real Estate is a subsidiary of AXA Investment Man-agers, which runs total assets of nearly €500bn. In Europe, AXA REIM comes in ahead of ING, Aber-deen Property Investors and Aviva – though its near-exclusive historical focus on the continent means it trails ING, Morgan Stanley and Deutsche Bank’s RREEF in global mandates. Because of the compa-ny’s origins, its property assets favour France (35%) and are followed by Switzerland (17%) due to the group’s takeover of Zurich-based Winterthur three years ago. The allocations to Germany/Austria com-prise 14%, with the UK at 12%. Its asset type break-down is office (49%), retail (20%), residential (11%), industrial/logistics (6%) and hotel/leisure and devel-opment/land (3% each).

The group serves over 130 institutional investors, including sovereign wealth funds, insurance, pension funds, fund of funds and retail customers in Germa-ny and UK. AXA is currently raising investment capital in the US and aims to develop its local pres-ence there. “We don’t have any US assets even though we do have American investors,” van der Bijl said. It also manages Asian mandates and intends to Asia gradually but steadily, focusing on China and Japan. It also has strong relationships with Mid-East institu-tions. “These sources of capital have a different pat-tern of cash-flow; they are not like pension or insur-ance companies,” he said. “The fact that their income comes from a constant and steady source makes them a very different kind of investor.”

AXA REIM’s CRE Senior Debt program, launched originally in 2005, targets primary lend-ing in western Europe and is thus a rarity in prop-erty investment management. It draws on AXA’s real estate expertise to assess potential borrowers and collateral but does not otherwise deal with end-customers. Originally fully funded internally, CRE Senior 1 provides financing alongside banks, help-


AXA REIM sees 2010 fundinflows exceeding last year;to expand primary debt fundThe property investment manager of French insurance group AXA is expecting capital inflows this year to exceed 2009, with growth in assets of up to €3bn. It has also opened a debt fund to external investors, testing demand for a product that could help fill the post-crisis shortage of bank credit.

AXA Real Estate’s Alphons Spaninks: “Most capital seeking core or opportunistic investments.”

ing in the origination process. “This is not a fund to invest in secondary debt but in new loans. Over the last two years we have assessed several billion euros in bank proposals but have been selective and only invested €200m so far,” said van der Bijl. “Banks come up with a loan proposal and we review the terms and sometimes change them to meet our cri-teria. For instance, a bank might come to us and say we want to issue €100m to an SPV from a high-quality borrower, long-term leased, at 60% LTV on a seven-year maturity. Normally, you might get 80bp over Euribor on the AA corporate credit of the tenant, but just recently we picked up 300bp well secured mainly because of market conditions. Banks are still under pressure on credit capacity.”

Because the fund pays a steady cash stream based on lending, it is categorised by institutions in fixed income allocations. “What we did was to build a track record with in-house capital so we have a running portfolio and can show a strong track record on collateral and risk management. Then we de-cided to open it up for other investors. They can come in via a separate portfolio as a larger institution, or through a fund if they are smaller investors. We have a number of strict criteria in terms of LTV ratio and diversification of risks”.

Speaking at the AXA Real Estate Netherlands headquarters in Utrecht, van der Bijl and Spaninks said the Dutch market, where huge pension and in-surance funds dominate, is gradually re-investing post-crisis but the bailout of some financial institu-tions by the state has made the process slow. “Insur-ance companiess are very cautious because they are preoccupied by the liquidity of real estate,” said Spaninks. “But of course pressure is mounting due to the situation with other asset classes. They are now open to having meetings about new products, core side, looking for stability in cash-flow and a good and

stable return compared to other things... Pension funds are different: they are tightly regulated by the financial authorities and need to have a good cover ratio.” Unlike in the southern neighbour Germany, insurance companies in The Netherlands have a his-tory of exposure to property, with allocations already between 10% and 15%.

Between 2005 and 2009, AXA Real Estate con-cluded over €27bn of transactions in the European marketplace, and last year made acquisitions worth € 1.4bn. Disposals were running at around €1.5bn. The investment process works through a local net-work of what AXA REIM calls ‘gatekeepers’ who

identify and assess assets for investment and dis-posal. This bottom-up ex-pertise is augmented by top-down macro research, but fund managers carry clear and ultimate ac-countability for the per-formance of individual vehicles.

What assets do the man-agers find most attractive In Europe at present? “We are looking throughout Europe but specifically fo-cus on western Europe - France, UK, Germany,

Benelux, Scandinavia, wherever we can identify good product,” said Spaninks. “Those are the markets where we think stability and cash-flow are available, purely in core, where we can get access through our regional networks. Countries such as Spain are particularly of interest for our opportunistic funds, but at the mo-ment, we see a lot of investors holding onto assets. They may ultimately be willing to sell but mostly not on the open market - and this direct contact delivers good buying opportunities.” He likes inner city retail across most of northern Europe. However, little is available and what there is is snapped up fast. Yields in these assets have dropped 100bp-150bp from re-cent highs in most jurisdictions. “I can’t recall in the last 20 years such a yield shift in retail,” Spaninks said, “in office but not in retail property.” pie


“We concentrate on

core property in the main

with a wide variety of

products across anything

directly linked to bricks and

mortar.”

Jaap van der Bijl, AXA Real Estate

Jaap van der Bijl, Head of Institu-

tional Clients: Opening the debt

fund for external investors.

propErty FUNDS

German property funds look to legal reform to combat disarrayThe €87bn German open-end property fund com-munity is badly in disarray, highlighted by recent ac-cusations of a spillover re-closure, but sector special-ists hope legislative reform to separate private from institutional investors will go a long way toward solv-ing the problems.

The re-closure for capital redemptions of TMW Pra-merica’s Weltfonds last month was a bitter blow to the manager which, since original closure in October 2008 alongside many others, had been carefully building li-quidity to 20% of capital to be able to reopen last De-cember. An announced 13.8% portfolio depreciation of Aberdeen’s Degi Global Fund, the largest writedown ever by a GOEPF, was cited by TMW Pramerica as sparking a panic outflow from its own fund, forcing a second closure in 14 months. While other industry sources say liquidity in TMW Weltfonds had dropped to a low base and the Degi move was taken as a pretext,

the debate flared in public again when a TMW Pramerica man-ager at a conference of the German fund valu-ers association (BIIS) last month hotly main-tained that liquidity had been high.

The situation is com-plex. After many funds closed around the time of the Lehman Broth-ers collapse due to runs on capital mainly from institutions desperately seeking to raise liquidi-ty, some have attempt-ed to re-open, only to be defeated by further withdrawals. The chal-lenge is exacerbated by the fact that open-end funds are legally only permitted to close to combat liquidity prob-lems for a maximum of 24 months. If they can-not do so, they are obliged to liquidate.

Firms that have either succesfully re-opened or avoid-ed closure altogether are mainly domestic: Deka Im-mobilien, a unit of the German savings banks’ invest-ment bank DekaBank – with nearly €20bn AUM the largest GOEPF manager, Union Investment, its peer from cooperative banks at around €18bn AUM, Deutsche Bank–RREEF, which draws on the private branch network to market its €5bn twin funds, and Commerzbank’s Commerz Real, Deutsche’s private sector counterpart distributing two funds holding €12bn.

Most others grappling with closures are foreign-owned, with limited access to distribution networks. This includes Aberdeen. It acquired Degi in late 2008 from insurer Allianz. The latter, after merging its Dresdner Bank unit into Commerzbank in exchange for a 10% equity stake in the enlarged group, has since given priority to selling fund products from CZ’s Commerz Real unit. AXA Investment Manag-ers, a unit of the giant French insurer, also announced last month it would remain closed for another nine months after initially re-closing in November after a re-opening in summer from the initial crisis-induced withdrawals halt. Morgan Stanley has held its €1.4bn P2 Value fund also largely closed since 2008; MS shocked the community in mid-2009 with an un-precedently deep valuation write-down, largely on foreign assets bought in the boom years.

The closures in 2008 were primarily caused by in-stitutional investors suddenly withdrawing large cap-ital sums to plug shortfalls caused by the collapse of other asset prices such as equities and fixed income. Thus the most immediate problem is to find a way to allow these temporarily frozen open-ended real estate funds to sustainably reopen – and it lies largely in separating institutional from private investors. BVI Director General Stefan Seip says Berlin has signalled approval of legislative changes: “The federal Finance Ministry has made clear that this topic is being worked on in the first half of 2010. A reform in the Investment Law is coming; that much is certain. Our proposal in short is the following - separation of pri-vate and institutional investors so that the latter are subject to a withdrawal notice period of one year. This could mean that in general no institutions invest in retail open property funds because this period is too long - and also the probability that institutions go into their own class of funds with other peers. This we would have to accept, but it would be in our view much the better solution.”

The proposal would apply only to new incoming capital and not to commitments of existing investors in GOEPFs. “Above all, German managers fully real-ise that we must solve this fundamental problem and can no longer offer free and open redemptions at no


or short notice on funds that are by definition in-vested long term in assets that cannot quickly be liq-uidated,” he says.

Many industry specialists are however beginning to wonder if property fund managers without links to German banking or national distribution networks can be viable going forward. “It’s a bigger problem than just this fund,” said a source close to the newly-closed funds. “There is also an element of people looking to benefit from this, sort of saying, ‘if your fund goes down, I could pick up some of the assets’. All the competitors are looking at each other and ask-ing if the other manager will liquidate altogether.”

One further element is that, in the past at least, German banks have provided emergency credit lines when real estate funds faced liquidity crises – options mostly unavailable to foreign suppliers. This occurred with Deka in 2005, hit by a fund management scan-dal, the cooperative bank fund manager in mid-dec-ade when it was still called Difa, and Commerzbank in recent years. Not all these support operations were made public. In December 2006, much of the sur-prise caused by Deutsche Bank’s grundbesitz fund closure after a run on liquidity caused by asset depre-ciation worries, arose because the Frankfurt HQ de-clined to provide a credit line.

“Obviously we have somethng like a system error,” one industry source said. “We have announced that investors always have the possibility to get their mon-ey back while on the other hand we are long-term investors in property that cannot be liquidated fast.” Switzerland has solved the situation by allowing cap-ital withdrawals just once per year. However, Barbara Knoflach, property funds representative on the BVI board, said recently the ‘Swiss solution’ is not appro-priate for Germany.

At the heart of the challenge are two main ques-tions: whether the German fund managers, through dominance of national distribution channels, can or should hinder foreign firms’ access to domestic pri-vate savers with competing products; secondly, whether it is more in the interest of the German community, particularly banks, to keep the current domestic framework and serve purely domestic sav-ers and institutions - or if greater long-term benefit is to be gained in in embracing newly-proposed Eu-ropean Union fund ‘passport’ guidelines (AIFM) and aiming to sell German funds to foreign private savers in countries such as Italy, France, Poland or even the UK.

Added a senior brokerage source, requesting ano-nymity: “I anticipate that in five to 10 years time there will only be three or four major fund companies in Germany, not more… I don’t think German institu-tions have any interest in allowing foreign firms to par-

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BVI Director General Stefan Seip: “A reform in the Investment Law is coming; that much is certain. Our proposal is separation of private and institutional investors so that the latter are subject to a withdrawal notice period of one year.”

propErty FUNDS

ticipate substantially in this market.” Whether or not this is true, the fact is that those fund managers who have been forced to close GOEPFs are foreign based: Degi-Aberdeen, AXA REIM, Credit Su-isse and Morgan Stanley. The Munich-based Kan-Am, also closed, is a spe-cial case, focusing prima-rily on US assets.

Seip sees the principal problem as more one of valuations hit hard by the crisis, particularly in non-German estates, than fo-cused on distribution challenges. He points to the success of SEB In-vestment, a unit of the

Swedish SEB group, at largely keeping its €7bn funds family open. “I wouldn’t say SEB has been at a disad-vantage compared to domestic managers,” he told PIE. “It has a strong parent company but that is based in Sweden. And even if its distribution is not unified, the manager succeeds with distribution through a se-ries of independent agents and firms and it has man-aged so far to stay open also in the hard times.”

Current events have also highlighted the question of whether GOEPFs can and should meet EU guide-lines to be marketed across the region. AIFM guide-lines being developed in Brussels since last spring aim at bringing all funds offered across the EU under standard rules in regard, among other elements, to valuations, commission structures, reporting trans-parency and governance. German specialists are un-sure if this is beneficial and most are resisting, so far with support from Berlin. Open property funds are still being managed according to practices set down 10 or 20 years ago, with limited commission trans-parency and valuation methods that continue to raise criticism for relying on long-term valuations that, in essence, substantially smooth out market volatility. Open-end funds are expected to report returns of 2%-4% for 2009, a year in which Jones Lang La-Salle’s transaction-based VICTOR prime office index recorded capital valuation falls of more than 12%. BIIS specialists claim that this is a justifiable market-based procedure, and that Anglo-Saxon critics fail to take into account the mutual nature of the products and the need to provide protection for private savers in a long-term holding asset class. pie Story by PIE Managing Editor Allan Saunderson

German property fund inflows at €3.2bn German open-end property funds ended 2009 with capital under management of €86.8bn, hav-ing taking in a net €3.2bn over the year, according to German fund association BVI. Officials expect more progress with the federal government on leg-islative changes to head off or moderate the volatil-ity that has led to fund closures over the last 15 months.

Net capital inflows to the 44 real estate OEFs have varied widely over recent years, with nearly €15bn flowing in during 2002 and just under €14bn in 2003, followed by net outflows in 2005 and 2006 due to relatively high returns in competing asset classes such as money market funds. The inflows to real estate OEFs resumed in 2007 – at €6.6bn – but fell back to just €600m in 2008, prior to last year’s improved result.

Departing BVI President Wolfgang Mansfeld, from Union Asset Management, who is succeeded in the post by DekaBank fund head Thomas Neisse, told a news conference that progress has picked up on legislative changes in discussions with Berlin af-ter the arrival of the new coalition of right of centre Union parties and the liberal FDP. The German real estate OEF community has been embarrassed by the re-closure of three funds in autumn due to a run on liquidity mainly caused by demands by wholesale institutional investors for quick with-drawal of capital.

Barbara Knoflach, property funds representative on the BVI board, said the so-called Swiss Model, where all investments are subject to fixed redemp-tion periods, is not transferable onto Germany. In-stitutional investment in OEFs has risen massively since the abolition of withholding taxes last decade. Law changes this year to bring German legislation in line with new EU guidelines are quite likely to in-clude the wished for amendments for real estate funds, she added.

A BVI survey also showed that the number of sav-ers investing in property funds rose last year to 20% of total investors from 14% in 2008. The data were part of the BVI’s year-end figures which showed that German funds across all asset types now manage a little over €1.7tr in capital, up just under €200bn last year. Of this, €52bn was net investment inflows and the rest due to asset value increases. Neisse said the impact of the massive fund capital under manage-ment is highly important and often underestimated. To help change this, the BVI is weighing setting up an office in Berlin. pie


PIE COMMENT: Neisse is a long-time friend of PIE and, having made a much-needed re-organisa-tion of the Deka fund management in his three years at the bank, is likely to bring more dynamism into the association’s relations with the legislator. Given

German savers’ propensity toward unlisted vehicles rather than the stock market, the amount of capital represented by BVI officials is, as Neisse correctly pointed out, not much short of German nominal GDP!


FundsManagement company

German open-end property fundsDecember 2009 & 2009 flows

Total Fundassets€tsd

Net capitalInflows (Dec)

€tsd

Net capitalInflows ‘09

€tsd

Total Fundassets€tsd

Net capitalInflows (Dec)

€tsd

Net capitalInflows ‘09

€tsd

Source: German Federal Investment Funds Association, BVI.

1.696.729302.507358.085

1.969.574577.961

4.904.856

51.1822.784.230

423.8513.259.263

10.354.0851.689.184

12.043.269

6.019.41900

325.34710.197

6.354.963

10.456.326

2.551.69913.008.025

685.2145.049.454

5.734.668

458.166458.166

281.244144.771

426.015

0-1.695

000

-1.695

15.0082.444

-13.0334.419

147.326-10.435

136.891

47590.67110.000

0101.146

36.4800

14.80251.282

18692.516

092.702

-9.666-9.666

-18.730-3.594

-22.324

51.38012.454

-11.707-572.451

-44.291-564.615

51.017-855.994

6.570-798.407

1.900.402-29.476

1.870.926

-64.311-454.754

40.788-1.016

-479.293

3.202.632-2.381.575

422.6991.243.756

97.8852.064.563

-1.576.173586.275

-22.015-22.015

-919.813-291.110

-1.210.923

KanAm GrundKanAm grundinvest FondsTOTAL

KanAm Grund SpezialKanAm Grund Spezialfonds GmbHKanAm SPEZIAL grundinvest FondsTOTAL

Morgan Stanley Real Estate Morgan Stanley P2 ValueTOTAL

TMW Pramerica TMW Immobilien Weltfonds PTOTAL

RREEF Deutschlandgrundbesitz europagrundbesitz-globalTOTAL

SEB InvestmentSEB Global Property FundSEB ImmoInvestSEB ImmoPortfolio Target TOTAL

UBS Real Estate UBS (D) Euroinvest ImmobilienUBS (D) German Residential Prop.UBS (D) 3 Kontinente ImmobilienTOTAL

Union Investment Real Estate UniImmo: DeutschlandUniImmo: EuropaUniImmo: GlobalImmobilienfondsTOTAL

WARBURG - HENDERSON W-H Deutschland Fonds 1TOTAL

Open Property Funds, Total

4.260.1634.260.163

409.157409.157

1.447.0611.447.061

840.480840.480

2.562.8832.147.431

4.710.314

06.227.751

849.9627.077.713

2.430.79510

454.7192.885.524

5.933.9356.786.1902.401.8011.689.518

16.811.444

249.179249.179

86.761.599

-11.597-11.597

4.9064.906

159159

-175.050-175.050

45.66541.568

87.233

036.06955.868

91.937

16.9920

-1.48015.512

-20.231139.763

17.17158.837

195.540

00

627.878

-455.977-455.977

34.15234.152

10.46410.464

-161.046-161.046

429.208-245.752183.456

-310.767170.177289.710

149.120

7.81810

-7.667161

775.8771.086.826

479.532299.226

2.641.461

21.00421.004

3.211.511

Aberdeen ImmobilienDEGI EUROPADEGI GERMAN BUSINESSDEGI GLOBAL BUSINESSDEGI INTERNATIONALImmobilienfondsTOTAL

AXA Investment ManagersAXA ImmoresidentialAXA IMMOSELECTAXA ImmosolutionsTOTAL

Commerz Real hausInvest europahausInvest globalTOTAL

CREDIT SUISSE CS EUROREAL ACS EUROREAL A CHFCS EUROREAL A EURCS PROPERTY DYNAMICCS-WV IMMOFONDSTOTAL

Deka Immobilien Investment Deka-ImmobilienEuropaDeka-ImmobilienFondsDeka-ImmobilienGlobalTOTAL

WESTINVEST (Deka unit)WestInvest ImmoValueWestInvest InterSelectWestInvest 1TOTAL

HANSAINVESTHANSAimmobiliaTOTAL

iii-investments.EURO ImmoProfilINTER ImmoProfilTOTAL

Barbara Knoflach, SEB Immobilien Managing Director and BVI board property funds repre-sentative: Swiss Model of one-day redemptions per year is not transfer-able to Germany.

propErty FUNDS

France’s UFG to invest €700m in 2010UFG Real Estate Managers, the largest French prop-erty fund manager, said it is confident that the do-mestic property market will see a gradual recovery and is looking to invest more than €700m in 2010 for its SCPI and OPCI property funds on behalf of institutional investors.

Around €500m of the total will be invested in business property, particularly offices in areas where prices have held up well in the Ile-de-France region and other large cities, as well as shopping centres with stable retail income. It has also earmarked €135m for residential property investments and €75m for diver-sification into other assets. In 2009 UFG REM in-vested a total of €350m and sold €165m of assets as part of its strategy of rejuvenating its asset base and increasing the duration of solid rental income streams.

Headed by Managing Director Jean-Marc Coly and deputy MD Marc Bertrand, UFG REM man-ages more than €5bn of assets, of which €700m in SCPI funds, making it the largest manager of SCPIs in France. The firm forms part of the UFG-LFP asset

management group created in 2009 in the merger of UFG and LFP Asset Management. The merged group manages over €32bn in assets which, it says, “is small enough to remain creative and reactive, and large enough to be robust and well equipped to ef-fectively face head on today’s challenges.” pie

New Spanish RE fund law may not speed re-openingsThe Spanish government is drafting legislation that will remove time limits on managers of Spain´s prop-erty investment funds to liquidate their property portfolios – a move designed to prevent managers from abandoning portfolios once two years have elapsed since liquidation announcements. But it may not bring fund re-openings.

The Ministry of Economy is drafting a Royal De-cree to grant an unlimited time period, and to extend supervision by stock market regulator CNMV until liquidation is completed from the current two-year maximum. Under old rules, investors would have had to take over disposals of assets without CNMV supervision after two years, a situation that CNMV Chairman Julian Segura said, “would have produced a complex situation for the management of funds which have a high number of participants.”

Madrid intends the new law to provide orderly liq-uidation of Spanish real estate funds. Even more than counterparts in UK and Germany, these have been struggling with dramatically sliding asset values, par-ticularly hit by the collapse in house prices. However, the change in view does not provide an immediate solution for investors in the Santander Banif or the Segurfondo property funds managed by Inverseguros on which redemptions have been frozen for two years with the consent of the CNMV. At closure, Banif In-mobiliario FII had 43,405 investors and requests for €3bn in redemptions. Segurfondos has 477 investors and an asset value of €524m at closure. pie

PIE COMMENT: Added to the woes in German open end property funds, and in Britain, the dramatic situa-tion in Spain may well add to the European Commis-sion’s determination to try to set an EU Passport for real estate funds, promoting free flows of private saver capi-tal across the region’s borders. However, the moves is complicated and not popular with some governments wishing to protect the segment so it is unlikely to pro-ceed early enough to prevent a national solution im-posed by the Madrid government.


Germany’s DekaBank to acquire up to €2bn real estate in 2010Germany’s largest open-end property fund manager DekaBank, the central investment bank of the sav-ings bank network, is likely to make acquisitions around the level of last year – up to around €2bn, Deka Immobilien Managing Director Thomas Schmengler says.

“I estimate our investment volume for 2010 similar to that of 2009, which would mean around €1.8bn to €1.9bn,” he told PIE in response to an enquiry. “If it goes well we will reach over €2bn. But I have the im-pression that it will be harder this year to find good assets.” However, this is all the more surprising since the mood in banks is not good, he added - implying that banks should be more interested in disposing of assets taken onto balance sheets from debtors, due to breaking of covenants, and in response to reviving de-mand for single properties and portfolios.

Schmengler told a conference in late January (see PIE 151) that Deka could have taken in as much as €4bn in new capital last year to invest in property, such was the strength of demand from retail inves-tors. Over 2009, Deka invested a total of €1.84bn spread over 32 purchase transactions, and made nine sales worth just over €100m, mostly smaller assets. Deka has around €20bn invested in property in two units Deka Immobilien and WestInvest.

Separately, the bank has signed a contract to ac-quire for €60m a portfolio of two logistics hall in northern Italy, built in 2007/08. One, with surface area of 50,000 sq.m. is located in the Milan region and is on a long-term let to a global food group. The second, also with surface area of 50,000 sq.m., is located in one of the most important areas of the Veneto region between Venice, Verona, Bologna and Padoa. pie (Story first published in PIE 152 on 8 February)

MGpA winds up $480m Global 1 with strong returnsPrivate equity real estate advisor MGPA, an associate of the Macquarie group, is winding up its Global Fund I, an opportunistic $480m global property fund which has delivered strong returns to investors and successfully sold off $5bn of assets.

Established in 1999 by existing senior manage-ment, Global Fund 1 invested on behalf of 15 insti-tutions across Australia, Europe, North America and the Middle East. It made 21 investments across 12 countries in Asia and Europe, including Belgium, France, Germany, Portugal, Spain and UK – and all major property sectors.

MGPA said the fund generated over two times eq-uity and delivered 20% gross IRR to investors “at a time when real estate was suffering from the after-math of the dotcom crash and SARS.” The fund is one of the first of its kind to be round-tripped within the agreed timeline, and to meet return targets. Sen-ior Partner James Quille commented: “Global Fund I was MGPA’s flagship fund and I am proud to say that the key personnel remain the same today.

Registered in Bermuda, MGPA now has $10bn of assets under management. It is now investing its $5.2bn Global Fund III, also including many inves-tors from Funds I and II. To date, MGPA has raised $8.1bn of equity for real estate investment. The firm is owned by senior management and Macquarie, a global provider of banking, financial, advisory, investment and fund management, listed in Australia. pie

RREEF stocks up with €123m Frankfurt buyDeutsche Bank’s alternatives group RREEF has ac-quired Frankfurt’s Park Tower office building for around €123m for the open-ended real estate fund grundbesitz europa. It was purchased from a Morgan Stanley fund at the end of December, it announced.

The prominent skyscraper in the city centre features 19,000 sq.m. of floor space on 28 floors. Originally constructed in 1972 the building was completely renovated and modern-ised between 2005 and 2007 under the supervision of the renowned ar-chitects Albert Speer & Partner and is currently let to international law firm Freshfields Bruckhaus Deringer until 2017. Following the Unilever-Haus in Hamburg, Park Tower is the second German property which RREEF has acquired for grundbesitz europa in the last three months. “Germany is currently a very inter-esting market for the open-ended real estate funds of RREEF. Addi-tional acquisitions are planned in the future,” the company said. pie


UFG Real Estate Manag-ers, France’s largest fund manager, is targeting €700m in 2010 at the domestic market, with a substantial part ear-marked for Paris office.

RREEF Managing Director Georg

Allendorf: Stocking up on Frankfurt,

and looking across Germany for more

acquisitions.

propErty FINaNCE / BaNkINg

Schroders positive on real estate debt funds Windows of opportunity exist for real estate equity investors to include debt funds in their portfolios during a property cycle, says investment manager Schroders. And though it warns in a report of a number of points to watch, the scarcity of debt has created a market inefficiency that allows for even bet-ter risk-adjusted returns.

“Real estate investors should seek to have their risk exposure fundamentally linked to real estate but ac-cepting a moderate level of interest rate risk,” said Rob Bingen, Schroders European Property head. Many unlisted real estate funds have historically used leverage in the range of 50%-65%, and in Europe debt funds have emerged as banks become more re-strictive. The report identified three main types: sen-ior mortgage loans, commercial mortgage backed se-curities (CMBS), and subordinated debt. But it cautions that important points must be monitored, including credit risk and default, intercreditor ar-rangements, and foreclosure legislation. Senior loans and CMBS may not be a natural fit for all indirect investors. But Bingen added: “This does not mean we believe they cannot provide compelling risk adjusted returns, but merely that the source of risk can deviate substantially from real estate exposure.”

Subordinated debt however is another story. Schrod-ers projected returns for a mezzanine debt and a mod-erately (50% LTV) leveraged equity investment and found the IRR expectations at 9.9% per annum for mezzanine and 9.4% per annum respectively. pie

PIE COMMENT: A sign of things to come. If banks cannot or will not lend, with many also deciding that

returns on third-party real estate lending cannot match proprietary activi-ties, particularly mergers and acquisitions, consider-able accumulated retail savings could be gainfully deployed in debt invest-ment. (See also AXA REIM in this PIE 156) As well, the industry is look-ing with dismay at the 2013/4 amortisation of a mountain of CMBS –an-other motivation for capi-tal to start targeting prop-erty debt in the not too distant future.

European banks more open to property lending European banks’ sentiment towards real estate lend-ing has improved for the first time since early 2008, with loan size rising and maximum loan-to-value ra-tios climbing as high as 70% in some cases, says bro-ker CB Richard Ellis.

Banks are more confident about lending to com-mercial property after the recovery in the European investment in the second half of 2009, driven pre-dominantly by increased appetite from equity buyers and an improvement in capital values, its latest Capi-tal Markets Report said. The shift in sentiment has subsequently led to increased competition among debt providers to offer improved lending terms on loans secured against prime real estate.

“Key lending terms for prime real estate stock and credible tenants have improved significantly over the last couple of months. Maximum loan size is gener-ally increasing, with maximum LTVs also on the in-crease at around 60%-70% when secured on prime real estate, whilst margins have fallen across most markets,” said Natale Giostra, of CBRE Real Estate Finance. “We see a theme of consistency running throughout Europe, with Italy, the Netherlands and Spain also reporting an increase in maximum LTVs to 65%-70%.” However, the shift in sentiment is concentrated on the top end of the market. Lending outside the prime segment remains limited, most no-tably in development finance. pie

French BpCE to lighten real estate commitmentsBPCE, France’s second largest banking group, said many of its real estate units no longer form part of its core business and indicated that some could eventu-ally be sold off.

Setting out its strategy for the next three years, BPCE CEO François Pérol said it is now making a distinction between strategic activities and financial investments. The latter includes most real estate hold-ings such as property management firm Foncia, de-veloper Nexity and its stakes in REIT/SIIC Eurosic, mortgage broker Meilleurtaux, and housebuilder Maison France Confort. “Within this framework our investments in the real estate industry (notably Nex-ity, Foncia, and Eurosic) would be managed as equity interests,” Pérol said.

In contrast, property financing operations such as Crédit Foncier de France and Société Marseillaise


de Crédit will remain part of the bank’s strategic businesses. “Our strategic choice is to focus the de-velopment of BPCE on business activities that di-rectly contribute to our mission of facilitating sav-ings deposits and providing financing solutions,” the group said. BPCE is looking to optimise the value of activities now categorised as equity inter-

ests. While this may eventually include the sale of some assets, optimising their value does not auto-matically equate to asset sales, and in any case the group is in no rush to sell assets. “I am not going to hurry to say that I have assets to sell,” Pérol said. “This would not be the best way of getting the best valuation for them.” pie


Coming back from year of stasis with EIRE; Italian property overcomes crisis aftershock By Antonio Intiglietta, Chairman, Ge.Fi., Milan


as 2009 came to a close, international and

Italian real estate operators found their

balance sheets telling of a difficult year

of stasis. But the news has begun to change now

and the word ‘recovery’ is starting to be heard as

often as the word ‘crisis.’ Without any doubt, the

year of change that we have passed through cre-

ated some radical transformations in the market

and its dynamics, and even in some of its main

players. The sector in Italy has taken a number of

new directions that should ensure it will never

again become as distorted as it has been in the

past. Talk of recovery is in the air, even if the the

road toward normality is sure to be long and dif-

ficult. There already exist financial instruments

and actors capable of making investments. Their

inactivity is dictated less by a shortage of oppor-

tunities than by the psychological aftershock of a

year of immobility in 2009. From now on, pro-

spective investments will be subjected to careful

scrutiny, with every project and operation metic-

ulously evaluated in terms of quality and practi-

cability. This is the new direction for every facet of

the market. Businesses will still invest in market-

ing and events of course, but final decisions and

budget allocations will be weighed much more

carefully and based on a tangible sense of utility.

The next edition of Expo Italia Real Estate

(EIRE) from 8 to 10 June in Milan takes place in

this environment, of course, under the influence

of the same trends - and its organisation and pro-

motion has already begun Europe- and world-

wide. For our part as organiser, Ge.Fi is well aware

that the fair itself and the commercial relation-

ships that support it cannot be considered auto-

matic, and that our task is to communicate our

convictions about the real utility of this particular

investment for the property community. We see

an active investment in knowledge and under-

standing as key to improving our sense of where

things really stand, without taking them for

granted. The event of EIRE, now in its sixth year, is

a place where individuals and businesses active

in real estate interact to create new opportuni-

ties, where specialised actors meet and network

in order to develop and expand their businesses,

heighten their understanding of the market,

converse at a professional level with new types

of competences, and accumulate and integrate

other experiences from particular work segment.

Unless prepared and executed with an active

and intelligent spirit, however, it will fail to

achieve its purpose, simply enough, and our or-

ganisational efforts will be in vain. The fair is a

magnet for professionalism and well-defined

specificity, a nexus of investments and learning

opportunities that, regardless of size, origin or

background, are inherently difficult to grasp in

their totality. At EIRE, however, all these elements

come together at the same time and place, mak-

ing that challenge a little less daunting. Knowl-

edge, after all, is the best investment that any

entrepreneur can make.

A challenge like EIRE requires greater effort

now because keeping up images or being able

to say ‘I was there’ no longer suffice to justify

participation. It takes an unbridled personal

commitment, which means preparing for the

event with precision and studying the other

players, including those already familiar, in or-

der to gauge their real significance within the

industry as a whole. In addition to the players

themselves, EIRE presents full international

panoramas in several key supply chains and real

estate sub-sectors: retail, tourism, logistics, resi-

dential housing and office. Furthermore, our in-

ternational element continues opening up to

important emergent countries that are propos-

ing development opportunities across and

throughout the Mediterranean region. For the

three days of the exhibition, EIRE 2010 con-

structs its own reality for showcasing concrete

opportunities and cultural highlights and bring-

ing together public officials, institutions, private

operators, associations and international firms

alike. For land development, as we see it, is the

underlying strategic driving force of any econo-

my; the manner in which it is handled must be

tailored to locations, cultures and traditions of

the country or region of activity. We need to get

back to the real meaning of entrepreneurialism,

for which satisfaction is less about self-interest

and personal wealth than it is about the passion

of realising a project to the benefit of the entire

community. Rising to this responsibility leads to

real satisfaction, and EIRE is how we choose to

make our own contribution. ai

Antonio Intiglietta can be reached at

[email protected]

Deutsche Hypo is financing the renovation of Hamburg’s Old Post Building (Alte Ober-postdirektion) on Stephans-platz, where building costs will reach €60m.

propErty FINaNCE / BaNkINg

WestImmo arranges €120m polish mall financing The Mainz-based Westdeutsche ImmobilienBank, acting as agent and arranger, has provided MGPA Europe Fund III with a €119.8m financing facility for two shopping centres in Poland, the Karolinka opened in 2008 and located in Opole near the Czech border, and Pogoria, which is near completion in Dabrowa Górnicza, a city in southern Poland.

The Karolinka mall comprises over 70,000 sq.m. space and is let to 127 retailers. Pogoria is anchored by a hypermarket and a retail gallery, both opened in 2008, and a DIY store due for completion this month. “The acquisition of these two modern shopping centres happened in difficult times and market circumstances,” said WestImmo MD Continental Europe Martin Erbe. “It was one of the biggest investment deals in CEE in 2009 and clearly shows the recovery of the market. WestImmo, together with partners, arranged and closed this transaction in a very tight time-frame thanks to the professional approach of all parties.”

WestImmo is the commercial property financing unit of Cologne-based WestLB and is now in a sales process by its parent after a European Union compe-tition ruling. In 2009 it committed more than €6bn in new loans. pie

Aareal operating slides but sees rising trend Wiesbaden-based property bank Aareal concluded 2009 with a solid result, with unaudited operating profit at €86m after €110m the year before, but op-erating profit of €23m generated in the fourth quar-ter, an increase of €13m over 4Q08.

Aareal anticipates a slight overall improvement for 2010 - even though the environment for commercial property finance is expected to be as challenging as in 2009. Against the background of a slight to moderate increase in interest rates, it expects net interest in-come to grow to €460m-€480m from €459m in 2009. Credit loss provisions should hold at manage-able levels, between €117m and €165m.

By the start of 2011, Aareal aims to start repaying the silent participation of the German Financial Mar-kets Stabilisation Fund (SoFFin). It assumes that in view of its solid refinancing situation, it will not need to draw on the remaining €2bn SoFFin facility in 2010. “We have weathered the crisis affecting finan-

cial markets and the economy satisfactorily up to now,” said Chairman Wolf Schumacher. “From to-day’s perspective, we see good potential for increasing operating profit in 2010, even though the market en-vironment is still fraught with uncertainty.” pie (Full story first published in PIE 155, 1 March)

Eurohypo sees up to €10bn new business German commercial real estate financier Eurohypo, part of the Commerzbank group, is likely to make a high two-digit-billion-euro in new business this year, excluding extensions, substantially expanding just €3bn done in 2009, said CEO Frank Pörschke.

He also told a results news conference that new business should move higher of its own accord due to better economic conditions, even though the bank is cautious. Board member Thomas Köntgen said the bank sees no need to raise the level of loan to value in credit approvals to achieve this. “Risk weighted re-turns are what is important to the bank’s perform-ance,” he said. Loans around 60% LTV would re-main the norm.

Pörschke said European competition requirements for Commerz to sell off Eurohypo by end-2014 only impacts strategy in as far as it tries to improve profit-ability and margins. No significant movement has taken place in this process to date. “I can’t say when this will take place, and I find it completely reasona-ble to keep all options option while the markets are anyway inappropriate for this kind of operation,” he said in answer to a PIE question.

Eurohypo reported a 2009 operating loss of €372m, 74% narrower than the €1.4bn loss in 2008, mainly on financial writedowns. However it took substantial crisis-hit property depreciations on 2009 of €1.2bn, up from 2008’s €858m, while the interest surplus on lending rose 12% to €1.3bn. The net re-sult was a €902m loss, down from €1.2bn loss in 2008. Eurohypo has sharply cut back exposure across geography and asset type and now focuses on 11 core markets outside Germany: France, Italy, Poland, Por-tugal, Spain, UK, US, Russia and Turkey. It made hefty provisions for US sub-prime but said this has ended. In 2009, offices in Budapest, Hong Kong, Prague, Singapore, Vienna and Zürich were closed.

Eurohypo made €7bn in credit extensions last year to take total assets up to €129bn. By asset type this was spread 31% for office, 24% in retail property, 22% in residential, 15% in other uses, and 8% in logistics. Some 44% of total book is domestic busi-ness. pie


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Eurohypo CEO Frank Pörschke: EU require-ments for Commerzbank to sell by 2014 means increasing attractiveness via focus on profitability and margins.

CHartS / taBlES

50 pROpERTy INVESTOR EUROpE l Edition 156 l March 2009 l www.pfeurope.eu pROpERTy INVESTOR EUROpE l Edition 156 l March 2009 l www.pfeurope.eu 51

Country Company LastPrice

Mkt Cap(€m) High Low YTD - 1Y -2Y -5Y

TR-performances-12M

European listed companies, stock market performanceTo end-February 2010; by 1-year performance

ImmoEastSociete de la Tour EiffelAtrium European REGAGFAHImmofinanzProLogis European CA ImmobilienGecinaNorwegian PropertyVastNed Offices/Ind.Conwert Immobilien Fonciere des RegionsAlstria Office REITCityconKlepierreSponda Is REITGlobe Trade CentreCorio Klovern FabegeSwiss Prime SiteUnibail-RodamcoVastNed RetailImmobiliare GDPSP Swiss PropertyWihlborgs EurocommercialNieuwe Steen Deutsche WohnenSilicCastellumWereldhaveIVG ImmobilienIcadeKungsledenColonia Real EstateCofinimmoHufvudstadenDeutsche EuroShopBeni StabiliMercialysBefimmoBabis Vovos

3.49 53.44

4.67 6.70 2.39 4.99 7.26

76.11 11.40 12.64

8.08 73.23

8.10 2.80

27.35 2.74 1.50

20.81 45.44 24.70 46.30 61.80

145.00 46.65

1.54 63.75

144.00 28.04 14.80

6.86 84.50 70.75 66.13

5.48 73.66 50.00

4.00 99.55 57.50 23.24

0.67 26.33 59.94

4.20

2910290

173715131139

950633

4763641237690

3559454620

4977761321

11593470

424808

229513233

852476

2015570

1134582561

145712541407

6903804

703114

126512031025128424221006

143

4.86 57.50

5.17 7.95 3.26 5.20

11.83 83.87 14.20 14.05 10.11 81.22

8.50 3.15

30.62 3.50 1.81

27.22 50.25 24.90 46.80 62.00

159.80 49.17

1.61 64.25

145.00 29.90 14.80 16.85 94.26 74.25 70.29

8.16 75.76 53.75

5.04 100.20

59.75 25.20

0.67 29.11 71.90

6.40

0.73 14.85

1.23 2.22 0.63 1.20 2.42

26.54 3.37 5.82 3.60

33.92 3.06 1.32

10.02 1.88 0.87

13.21 24.38 15.60 25.90 41.80 86.88 26.02

0.80 41.50 91.00 18.00 10.05

6.49 51.91 43.40 45.39

3.37 51.38 28.50

2.44 72.50 41.50 18.80

0.35 19.62 53.50

1.64

331%295%271%227%206%195%157%132%128%116%107%107%

95%92%81%74%70%57%57%55%52%50%50%48%47%43%42%41%38%38%35%35%35%34%33%32%29%27%24%23%14%

6%-4%

-10%

-69%-50%-75%-57%-78%-61%-68%-33%-82%-43%-55%-31%

N/A-45%-36%-60%-23%-56%-24%

0%-39%

3%-25%-20%-57%

3%21%

-20%-13%-75%-26%-15%-21%-83%-33%-37%-89%-19%-16%

-4%-42%

-7%-13%-86%

-50%6%

-62%N/A

-65%N/A

-64%24%N/A-4%

-40%63%N/A37%43%

-19%N/AN/A41%58%-3%37%85%29%N/A54%N/A41%27%N/A43%49%12%

-56%85%87%

142%9%

53%47%-4%N/A13%

-65%

-9%1%

-1%5%

-4%16%-8%0%

-16%7%

-5%3%8%

-5%-4%0%

-9%-19%

-5%8%2%7%

-6%2%

-1%9%9%

-3%4%2%

-1%-2%-1%2%

10%2%

-8%1%6%2%

17%7%

-3%-4%

Source: Global Property Research, data to end February 2010

AUTFRAAUTDEUAUTNLDAUTFRANORNLDAUTFRADEUFINFRAFINTURPOLNLDSWESWECHEFRANLDITACHESWENLDNLDDEUFRASWENLDDEUFRASWEDEUBELSWEDEUITAFRABELGRC

Source: EUROPACE, Hypoport AG. Adjusted on hedonic and seasonal basis

Hypoport German House Price Index, HPX% change y/y

Jan 07

May 07

Apartments Existing homesNew homes

-6%

-2%

-4%

0%

2%

Sep 07

Jan 08

May 08

Sep 08

Jan 09

May 09

Sep 09

Jan 10

May 10

Sep 10

4%

6%

Total

Sep 06

Source: Global Property Research, 2010

Total Return PerformanceGPR 250 (local currency)

Mar 09

Apr 09

May 09

Jun 09

Jul 0

9

Aug 09

Sep 09

Oct 09

Nov 09

GPR 250 Americas GPR 250 AsiaGPR 250 Europe

Dec 09

Jan 10

140

100

150

90

110

120

170

130

160

180

190

200

Source: EUROPACE, Hypoport AG. Adjusted on hedonic and seasonal basis

Hypoport German House Price Index, HPXabsolute index values

Nov 05Feb 06

Apartments Existing homesNew homes

88

96

90

98

102

May 06

May 07Aug 07

Feb 08May 08

Feb 09May 09

Nov 09Feb 10

Aug 10

106

Total

Aug 05

92

94

100

104

Aug 06Nov 06Feb 07

Nov 07

Aug 08Nov 08

Aug 09

May 10

Nov 10

Inde

x 20

05 A

ugus

t = 1

00

Source: Global Property Research, 2010

Total Return PerformanceGPR 250 (local currency)

Mar 09

Apr 09

May 09

Jun 09

Jul 0

9

Aug 09

Sep 09

Oct 09

Nov 09

GPR 250 Germany

Dec 09

Jan 10

140

100

150

90

110

120

170

130

160

180

190

GPR 250 NetherlandsGPR 250 SwedenGPR 250 France

Source: European Central Bank.

Eurozone M3 Money Supplyseasonally adjusted y/y % growth

19821983

0%

6%

2%

8%

12%

1981

4%

10%

14%

19841985198619871988198919901991199219931994199519961997199819992000200120022003200420052006200720082009

gErMaN HoUSE prICES rISE IN JaNUary

German house prices are showing signs of recovery after steep falls last year, and

in January were in aggregate just 0.8% below year-ago levels, according to the

HPX index of the Berlin-based Hypoport (below). The index was up 0.3% in Janu-

ary alone, its largest monthly increase in the last six months. New houses and

apartments continued stronger than existing homes, though prices generally

are stabilising. “The demand for residential property is being helped by positive

economic developments, low rates of interest, a lack of profitable investment

alternatives and the fear of possible inflation,” Hypoport said. New subsidy pro-

grams from the state-owned KfW bank are encouraging energy-efficient con-

struction, while the growing number of households and the trend to move into

conurbations could boost future demand and prices should therefore continue

to remain stable. . However, “Existing homes that do not reflect the latest state of

energy technology and require renovation to comply with the Energy Savings

Directives may witness declining prices. Uncertainty surrounds the high level of

national debt and developments on the labour market.” pie

gErMaN lIStED FIrMS CUt portFolIoS By €1.6BN

Germany’s largest real estate firms handled

€1.77bn of deals last year, and more than 90% of

total volume were sales with a volume of €1.6bn,

says a new study. Most acquisitions and sales were

made in 3Q09, after 1H09 saw little activity. The

study by the REITs in Deutschland portal showed

that, just as in 2008, deal volumes in 2009 dropped

by more than half compared to the previous year.

The largest individual transaction in 2009 was IVG’s

sale of the Machiacini project in Milan, with a vol-

ume of €300m. The Bonn-based concern had the

largest volume overall, with €1bn of transactions

over the year. Of the transactions, 38.3% were for

residential properties, 17% office and 6.38% for re-

tail assets. Deal numbers for 2009 cover data from

20 stock exchange-listed real estate firms. Like

other traded property across Europe, German

groups – effectively cut off both from equity, due

to stock values, and credit, due to banks’ reluctance

to lend - used asset sales last year to raise liquidity

and, in some cases, stay afloat. pie

grEENINg tHE BUIlt ENvIroNMENt

Stockholm to outline green credentials at MIpIMThe Mayor of Stockholm, Sten Nordin, is to deliver a keynote address at the MIPIM property trade fair on Wednesday, 17 March, outlining his vision of a holistic approach for sustainable urban development and explaining the importance of identifying syner-gies between urban functions and the best-adapted technical solutions.

MIPIM organisers said Stockholm is a pioneer in sustainable urban (re)development and was one of the first municipalities worldwide to build the Hammarby Sjöstad eco-district with a fully-integrated infrastruc-ture in the early 90s. Given the success of Hammarby Sjöstad, another eco-district is now under construc-tion in Stockholm. This second new eco-quarter in western Liljeholmen, in the south west of the city, will set new challenges. Stockholm’s deputy mayor Kristina Alvendal commented: “We see this proposed eco-quarter as a collaboration with property owners. It will test how we can achieve a framework for high-energy efficiency standards when land and property is entirely in private ownership… Our city is environmentally friendly, which is attractive to a lot of investors.”

The Swedish sustainable urban development model is now exporting itself: SymbioCity, a network founded on the initiative of the Swedish government and industry, is a concept based on combining exist-ing urban systems and benefitting from synergies. It takes into consideration varied aspects such as urban technology resource efficiency, and renewable re-sources and resource management that minimise waste and optimise recovery and reuse. It encourages the development of new and better system solutions as well as the most efficient use of natural resources. The SymbioCity concept will be presented at MIPIM on the stand of the Swedish Trade Council.

Ralph DiNola, Principal of the US Green Building Services company, will also deliver a keynote speech on Living Buildings and Living Communities: the Need-

ed Quantum Leap for a Sustainable Built Envi-ronment. “We must make a quantum shift in our approach to and maintenance of the built environment to head off the looming environ-mental crisis,” he says. DiNola will discuss pos-sible new angles and ap-proaches for interna-tional real estate to take

the next step in realising a sustainable built environ-ment. Another panel, ‘Sustainability sans frontières,’ will examine the importance of consistent internation-al criteria for green buildings. Investors and end-users need to know what they are getting when they acquire a so-called ‘green’ building. There is currently little harmonisation between different ‘green building’ la-bels throughout the world. pie

Sweden’s NCC sells Green-Building in Denmark Swedish developer NCC has sold the first two stages of the Zenit Company House office project in Aarhus, Denmark, for SEK256m to a joint venture between Nordea life insurance, and Danish public pension funds PensionDanmark and Lægernes.

NCC said the transaction will have a favourable impact on earnings in the fourth quarter of 2010, when ownership is transferred to the purchaser. The building, currently under construction, will be classed as a GreenBuilding, which means that energy con-sumption is expected to be at least 25% than the pre-vailing norm. “NCC has developed and constructed 14 GreenBuildings in the Nordic region,” said NCC President Joachim Hallengren. “An increasing number of investors and tenants are demanding environmen-tally smart buildings for climate and cost reasons.”

The building comprise 10,000 sq.m. of office space, of which 77% has already been leased and the largest tenants include RGD ReVision and insurance company Tryg Vesta. Zenit Company House is lo-cated centrally, offering excellent visibility on one of the key entrance roads to Aarhus, Denmark’s second-largest city. It is a modern and flexible office building, complete with meeting rooms, conference facilities and restaurants to be shared by its corporate tenants.

The first of the two stages will be completed this month and the second in December. The plan is to then build an additional two stages with 3,500 and 7,000 sq.m. of floor space, respectively. The joint venture company is called Ejendomspartnerselskabet af 1/7 2003. pie

Green buildings to be-come separate asset class A survey by Hamburg’s Union Investment confirms growing interest in sustainable real estate investment in Europe. It finds that a significant number of in-vestment projects will incorporate sustainability cri- ph

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teria in the future, greatly increasing the likelihood of a separate asset class for green buildings emerging over the next few years.

The survey involving over 220 investment deci-sion-makers property companies and institutional real estate investors in Europe, shows that 63% of

those in Germany, France and the UK intend to in-vest significantly more in sustainable buildings, while 60% stated that sustainability criteria are already an established part of their investment strategy. Con-ducted by market research institute Ipsos in Decem-ber, its also reveals investor dissatisfaction with the


Swedish real estate follows its own path out of financial crisis By Kristofer prander, Vencom property partners, Stockholm


International investor interest in Swedish

real estate investment increased dramati-

cally between the years 2003 and 2008. Even

though Sweden is a relatively small country, the

stock of office and retail premises is rather large

and a strong portion of stock is actively traded,

leading to high liquidity. Furthermore, data on

owners and other key material is easily available.

Large volumes of real estate were acquired dur-

ing these years by UK and US-based property

funds, German funds, Norwegian investors, Dan-

ish investment vehicles and others. In fact, the

global credit crisis affected Swedish property

rather late compared to other countries. Yields,

rent levels and vacancy rates were still compara-

tively strong, as indicated by the 2007 total re-

turn on property investments estimated by IPD

Norden of 14.7%. Transaction activity remained

high and fundamentals were positive almost up

to the collapse of Lehman Brothers. Inflation in

October 2008 was 4.5%y/y, GDP growth was

positive and 3-mth STIBOR was at 5.3% and had

steadily increased from its bottom in June 2005

of 1.6%. However, transactions more or less froze

in the last quarter of 2008 and market profes-

sionals expected significant increases in yields,

decreasing rent levels and increasing vacancies.

The 2008 total return on property investments

slid to a negative 3.3%. At the time, many ex-

pected significant portfolios of real estate to be

taken over by banks in the same manner as the

early ‘90s when Sweden was severely hit by that

financial crisis. Many investors prepared them-

selves to benefit from the opportunity of acquir-

ing distressed assets. The Swedish central bank

lowered its repo rate quickly to 2% in early 2009

from 4.75% in autumn 2008, and then further to

0.25% in summer 2009. The fact that cuts came

shortly after the first signs of weakness in real

estate fundamentals probably saved quite a few

investors from bankruptcy or restructuring. Still,

several firms have been in distress during the

last 12 months.

During 2009 the credit crisis started to have an

impact on real estate fundamentals, and all prop-

erty types were affected. Rents started to slide,

vacancies rose due to falling employment - main-

ly in western Sweden where the automotive in-

dustry is important - and significant quantity of

newly-constructed office supply came onto the

market primarily in Stockholm and Malmö re-

gions. Yields were also affected but the small

quantity of concluded transactions gave apprais-

als little market evidence. The shift was less sig-

nificant than expected in the fall of 2008, and on

centrally located properties was particularly lim-

ited, with a few transactions closing below 6%.

Not surprisingly, the yield gap between CBD and

secondary locations or below-prime assets

climbed significantly. Naturally, the transaction

market last year was characterised by low activity

and the few deals done were mainly residential

and centrally-located commercial. Foreign banks

active during 2005-2007 more or less closed

down activity and physical presence, which left

only Swedish banks as buyers’ main debt financ-

ing option. Domestic banks, on the other hand,

focused on clients with whom they had long re-

lationships; so that the principle acquirors at that

time were domestic private investors and institu-

tions with limited need for credit.

By end-2009 and now the beginning of 2010,

the investment market has started to ease. Ger-

man funds have become more active in the core

segment and banks more oriented towards new

business. In Stockholm the large quantity of new

office stock that came onto the market last year or

is due for completion in 2010 will clearly affect va-

cancies and rents. As in other national markets,

institutional capital will continue to seek core

properties. For value–ad and opportunistic inves-

tors, we believe the opportunities exist in identify-

ing secondary properties with the right prerequi-

sites and to work these intensely both in leasing

and technical upgrades to meet tenant require-

ments of cost efficiency, higher quality premises,

and environmental sustainability – mainly in of-

fice. Recent surveys show that the financial crisis

has had little impact on the green building trend

among tenants. We also see significant reposition-

ing opportunities in retail, mainly in external big

box areas and high street and central retail in ma-

jor Swedish cities. The realisation of these oppor-

tunities will require active asset management and

local expertise. It should not be overlooked that

forthcoming refinancing related to the large deal

volumes of 2005-2008 will create some changes in

ownership, although we no longer expect the ex-

tent of distress anticipated in 2008. kp

Kristofer Prander and colleague Per Rutegård can

be reached at [email protected] and

[email protected]

Stockholm parades Green credential at MIPIM: May-

or Sten Nordin outlines holistic approach for urban development.

grEENINg tHE BUIlt ENvIroNMENt

proliferation of certification systems in Europe: 57% of those surveyed are in favour of a standard Euro-pean certificate for sustainable buildings, with the figure rising to 80% for French respondents.

“A European solution would consolidate a trend that has been identified by many investors: Half of those surveyed believe that new buildings incorporat-ing ecological and sociocultural criteria have the po-tential to form a separate asset class in the future,” Union Investment said. pie

prime Office Munich tow-er wins first LEED goldThe SV high-rise in Munich, an asset owned by prop-erty group and pre-REIT Prime Office, has become the first office building in Germany to be awarded a LEED certificate in gold. The building, HQ of the Süddeut-sche Zeitung newspaper publishing house, delivers strong energy and water efficiency thanks to its consist-ently designed air-conditioning and energy concept.

“Almost 40 % of global primary energy demand is accounted for by the construction and operation of buildings,” Prime Office said. “During times of ever scarcer resources, the topic of sustainability is becom-ing increasingly important.” Leadership in Energy and Environmental Design (LEED), awarded by the US Green Building Council, is acknowledged to be the most successful classification system for sustained buildings and is becoming increasingly significant in Germany, the Munich-based firm said.

For the investor and tenant of SV, the eco-nomic benefits of sus-tainability standards were of decisive impor-tance, the firm said. The sparing use of resources attested by LEED, and substantially reduced primary energy require-ments ensure improved asset quality and also enhance attractiveness and marketability of the property, which also benefits from lower life-cycle costs. Commis-sioned 14 months ago, the tower scored 42 points in the six main LEED certification cat-egories of sustainable

location, water efficiency, energy, materials and re-sources, interior qualities as well as innovation and planning processes. Gold status requires a minimum score of 39.

A unique interaction between geothermal systems and the use of surplus thermal energy by shifting heat between the building and soil ensures virtually CO2-neutral air-conditioning in summer and winter. Room sensors regulate temperature and lighting. Thanks to a sophisticated building concept, the special require-ments of a publishing house are taken into account, and attention is focused on individual employee’s needs. Sensors measure the natural influx of light and, by means of optimised additional artificial sources, ensure ideal light conditions in the workplace while minimising energy consumption. “The resulting en-ergy savings, up to 80 %, are very impressive and plain to see, in every sense of the word,” Prime Office said. SV was designed by Oliver Kühn from GKK+Architekten (Berlin), and planned by WSP CBP Consulting Engineers (Munich). General con-tractor was FOM Real Estate (Heidelberg) while LBBW Immobilien (Stuttgart) also delivered evidence of their extensive Green Building expertise. pie

German DGNB to expand international networkThe German Sustainable Building Council DGNB is re-organising to push forward with an internationali-sation of its certification use. It said in a statement that increasing used abroad has thrown up the need for stronger connections to partner organisations, and it has made management changes to reflect this.

Based in Tübingen in southern Germany, DGNB (Deutsche Gesellschaft für Nachhaltiges Bauen) is to establish and international board, and has named Austrian Philipp Kaufmann to head up the set-up of an international network. Kaufmann is the initiator and current president of the Austrian Sustainable Building Council (ÖGNB) and succeeded over a few months in gaining over 120 founder members for this body, now a DGNB partner. ÖGNB has already certified one building and another 30 have registered for examination and eventual qualification.

DGNB has also appointed deputy Business Man-ager Christine Lemaitre to the top post succeeding Christian Donath, who is leaving. Lemaitre will has been leading the certification procedurese and in par-ticular promoted the development of a number of system variants. The post of deputy will be taken pro-visionally by Johannes Kreissig, a DGNB presidium member. pie ph

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BUllEtIN BoarD


March 8– 10, Monday-Wednesday The International Hotel Investment Forum, BerlinThe 13th annual IHIF is one of the premier event for the global hotel indus-

try, attracting over 1500 attendees from all areas of the industry. Three days

of speeches, panel sessions, networking, a world-class educational pro-

gram and an exhibition. More information: www.berlinconference.com

March 16-19, Tuesday-FridayMIpIM 2010, CannesThis event draws upon its international coverage and reputation - plus

sunny Cannes weather! – to attract influential decision-makers, offering

them access to a showcase of development and investment projects.

An important date in the European real estate calendar.

More information: www.mipim.com

March 18-19, Thursday-Friday IMN, 3rd Annual Global Covered Bonds Conference, LondonIn its third year, this conference will tackle important issues considering

the highly volatile developments in this important funding class over

the last 12-24 months. More information: www.imn.org

April 2-5, Friday-MondayLong Easter weekend in Europe, US

April 15-18, Thursday-FridayTRE–Tourism Real Estate, Venice The first international exhibition targeting quality tourism property, lo-

cal governments, territories and entire supply chains is promoted by

ExpoVenice. It is conceived as four days of discussion, meetings and

business relations between international actors.

More information: www.tre-expo.com

April 21-22, Wednesday-Thursdayprague Real Expo 2010, pragueThis new international trade fair aims to be the largest focusing of

Czech real estate. Held at the Congress Centre, Prague, in April 2010,

will together be held with eight accompanying specialised conferenc-

es. It is held with the support of the city of Prague.

More information: www.prague-real-expo.com/en/index.php

April 22-23, Thursday-FridayINREV 2010 Annual Conference, VeniceThe annual conference of Europe’s property funds association will pro-

vide insights and face the key question of how the industry moves for-

wards from here. More information:www.inrev.org

April 27-28, Tuesday-WednesdayDeutsche GRI, FrankfurtGlobal Real Estate Institute brings its own brand of discussion groups

and networking opportunities to the real estate investment market of

Germany. More information: www.mygri.com/germany

April 28, WednesdaypIE French property Breakfast, LondonPosing the question on valuations prospects, PIE is hosting a panel dis-

cussion with senior real estate executives on the French market. Sub-

scribers gain free access to any four of our Property Breakfast series

scheduled throughout 2010.

More information:www.pfeurope.eu/events

April 28-29, Wednesday-ThursdayCity Marketing & Development Congress, MoscowCMDC is a new international congress to assist regions and cities

across Russia to promote themselves and increase competitiveness in

the global market. It will discuss and promote best international prac-

tice in location promotion – a key condition for attracting inward/for-

eign investment and creating a better environment for development

and growth.

More information: http://en.cmdc.ru/

April 28-29, Wednesday-ThursdayICSC European Conference, pragueThis will cover: How to survive and thrive in difficult times? How has the

relationship changed between landlords and tenants? New retail con-

cepts; What is still affordable / sustainable?.. and other retail topics.

More information: www.icsc.org

May 6-7, Thursday-Friday17. Handelsblatt Jahrestagung Immobilienwirtschaft, BerlinGerman language conference

More information: www.immobilien-forum.com

May 18-20, Tuesday-ThursdayReal Vienna, ViennaDecisionmakers from over 50 countries meet around the platform

designated for commercial property and investment in CEE. Compa-

nies, cities, and regions present in one of the most modern exhibi-

tion centers in Europe, the Messe Wien, investment opportunities,

projects, and services. The fair is complimented with a program of

‘Property Talks’.

More information: www.messe.at

Diary dates upcoming in 2010❒ BuLLetin BoArD

Germany’s Sustainable Business Council DGNB is reorganising to boost its international network, and stay in the race to set green standards.

rESIDENtIal propErty

Berlin housing IpO may be held up by Berlin Senate What could potentially be the largest real estate stock market flotation in Germany for several years, the 52,000-unit GSW housing portfolio in Berlin, hangs in the balance as discussions continue between the owners, private equity group Cerberus and Goldman Sachs Whitehall funds, and the city’s Senate which needs to approve the move.

The Handelsblatt newspaper reported that discus-sions are ongoing about a potential IPO of the port-folio, sought by the owners, and no decision has been made. Since Berlin is run by a coalition of the centre-left Social Democrats and the hard-left Linke party – and left-wing opposition to the stock market flota-tion of residential portfolios kept these out of eligible REIT assets three years ago – approval of the move remains highly uncertain.

Failing a full flotation, the owners have three op-tions: float less than 49% on the exchange, which may assuage Berlin city-state concerns but would dampen investor interest; delay until 2014 when Ber-lin’s contractual veto rights expire; merge the portfo-lio into another group. Deutsche Annington, and listed Deutsche Wohnen have both shown interest.

GSW Chief Executive Thomas Zinnöcker is impa-tient to move forward and is lobbying against long delays. “If we want to exploit the opportunities in Berlin we need access to equity capital,” he said. With the current capital position, a maximum of only

€40m is available annually for investment, sufficient to acquire about 1,000 units. This implies a long and slow build phase to GSW’s target portfolio volume of 70,000. Owned by British private equity group Terra Firma, Annington boosted its Berlin portfolio last year by 4,000 units to 15,000. Though Deutsche Wohnen last year raised €400m through a rights is-sue, this is only around half the value put on the GSW portfolio. pie (Full story first published in PIE 153 on 15February)

PIE COMMENT: It looks highly unlikely that the Ber-lin coalition is in a position to approve this flotation, given its political colour under leadership of Mayor Klaus Wowereit – himself deputy chairman of the SPD and an ambitious politician. But the German property community is looking for just such a bellwether flotation to encourage more portfolios to come to market and boost the traded sector. Annington is speculated to be among them. Given Terra Firma’s problems with the UK’s EMI, new capital from whatever source would be welcome.

French Nexity posts €50m net loss due to writedownsListed French firm Nexity, the nation’s largest com-mercial and resident property development group, posted a €50m net loss for 2009 as a result of €122m of writedowns in assets acquired by its services and distribution businesses between 2006 and 2008.

But CEO Alain Dinin said the outlook for these businesses remains favourable and the writedowns do not call into question profit targets. REIT/SIIC Eu-rosic, in which Nexity has a 31.7% stake, also made a negative contribution of €32m to group accounts. Excluding writedowns and Eurosic, Nexity last year achieved net profit 21% lower at €104m. Revenues rose 6% while group recurring operating profit de-clined 16%. But Nexity ended 2009 on a positive note. “With housing reservations strongly up, sales increasing and profitability at a satisfactory level, the group has resisted the impact of the recession of 2008 well,” Dinin said.

Nexity had an order backlog of €2.6bn at end-2009. It expects to have a 10% share of a French resi-dential market of around 90,000 new homes in 2010 and forecasts that orders will pick up. The group is proposing a 2009 dividend of €1.60, up from €1.50 in 2008, and aims to maintain the payment at €1.60 this year. “Our goal of paying out a high level of divi-dend in 2011, as in 2010, demonstrates our confi-


dence in the outlook for the group,” said Dinin. Nex-ity’s financial structure improved in 2009 as a result of the €540m sale of its stake in listed mortgage bank Credit Foncier de France. This meant that it had a net cash position of €105m at the end of 2009, com-pared with net debt of €563m a year earlier. Dinin said the company also has extensive credit lines avail-able which will enable it to finance further develop-ment operations or acquisitions. pie

Spanish house building permits’ slide slowsSpanish new home construction permits fell by 56% to 110,862 in 2009 but the slide in the year as a whole was greater than in the fourth quarter, indicat-ing that the disastrous market conditions may be be-ginning to bottom out.

Figures released by the Superior Committee of the Architects Institutions of Spain showed that the fall in building permits in fourth quarter was less marked - a reduction of just 36%. This compares favorably with the fourth quarter of 2008 however. The com-mittee said the main reason for slowdown was a fall in the number of free market construction permits to 76,228 in 2009 from 208,124 in 2008. pie

Rabobank’s Bouwfonds halts housing fund inflowsBouwfonds, real estate arm of the private Dutch Ra-bobank group, is seeing soaring interest from institu-tional investors for its European Residential Fund, with inflows far exceeding expectations. It said criti-cal excess liquidity has obliged it to augment a wait-

ing list for investments over €5m by suspending in-flows and starting a reservation system.

The aim is to decrease liquidity to 10%, and link future inflows to selected new acquisitions. This will safeguard the interest of current investors and protect performance. Alongside the new waiting list Bouw-fonds has increased its acquisition pipeline. Several high quality real estate investments were recently completed in Germany, Norway, and Sweden, and further acquisitions are in process in Germany, France, and the Netherlands.

Set up prior to the onset of the financial crisis, BERF offers institutional investors a combination of a low risk profile and steady direct returns, it said. Primarily targeted towards German institutions and high net worth individuals, the target Gross Asset Value is €1bn to €1.5bn in five years. Its asset focus is core middle-class family apartments and houses in city centre locations, residential suburbs, and satellite cities of major agglomerations. Acquisitions focus on existing properties and may also include forward ac-quisitions and refurbishment.

Established in 1946, Bouwfonds was sold to Ra-bobank in 2006 by ABN Amro, with its financial arm going to SNS REAAL. Bouwfonds REIM man-ages in excess of €7bn in GAV and has structured 16 residential funds, totaling over €2.4bn GAV. With a base in Hoevelaken, The Netherlands, it also has of-fices in Berlin and Paris. pie

Sofia house prices to fall another 10% Residential property prices in Sofia could fall by an-other 10% this year before stabilising, and a similar trend is expected for other types of property as hopes of buyers being lured back by lower prices appear pre-

pIE seeks Editors and Subscription Managers Property Investor Europe is seeking Editors and Subscription Managers to help with expansion plans. In particular, Editors are sought in Italy and the Nordic region, as well as a deputy editor to be based in Frankfurt. Preferred are English native speakers with one or more European languages and business journalism experience. Subscription managers can be based in Uk, US or continental Europe, and will be tasked with expanding our growing subscription base via marketing and telephone sales. Remuneration will be commensurate with experience. Please contact PIE via email at [email protected], or [email protected].

propErty INvEStor EUropE Join the professionals

MUltI rEStartS CZECH NEW karolINa aFtEr DElay

Multi Development is restarting construction of its major inner-city development in the

Czech city of Ostrava, after its recent closing of a funding deal of €99m through a syndicated

loan from four banks. With this restart, Multi is continuing the project after a one-year break

caused by the financial crisis.“ This confirms the exceptional power and solid nature of the

New Karolina project and

demonstrates that there is

space for this good strong

project developed by Mul-

ti. New Karolina will touch

everyone’s heart,” said

Luboš Kočí, CEO of Multi

Development Czech Re-

public. Within a 32ha site,

New Karolina is one of the

largest urban development

and revitalisation projects

in the Czech Republic.

rESIDENtIal propErty

initiatives to assist borrowers in financial difficulty.” These initiatives and programmes were recently compiled in a report sent to the European Com-mission.

In addition, the EMF study found significant cor-relations between loan performance and macroeco-nomic conditions. “With some market data dating back to the early 1990s, it was easy to observe that high mortgage interest rates and high unemploy-ment were accompanied by higher rates of defaults,” it said. This is true for the UK, Spain and Denmark where arrears were twice and sometimes three times larger than levels in the aftermath of the global cred-it crisis. “One defining aspect of today’s mortgage markets is the historically low level of mortgage in-terest rates, a direct result of the expansionary mon-etary policy pursued by the ECB and national cen-tral banks. This is in contrast to the high level of rates prevalent in the early 1990s.” Third quarter data appears also to show a general stabilisation of trends in housing and mortgage markets, though borrowers and lenders could still see an increase in defaults and repossessions if central banks embark on tighter monetary policy. pie

German housing firm Speymill see covenant risks AIM-listed German residential property firm Speymill said it risks breaching a bank lending cove-nant in the near term relating to amortisation on one of its six facilities involving a loan of €353m out of total group loans of €1.18bn.

The company statement followed an announce-ment last month that directors monitoring its bank-ing facilities saw no problems at that time. In a more recent statement, Speymill said: “While the company is currently compliant with all existing terms and covenants of its banking facilities, in the absence of new measures and in light of a revised calculation methodology requested by the lending banks, one of the banking covenants in one of the group’s facilities will likely be breached in the near term.” Directors are continuing discussions on measures to remedy any covenant breach, should that occur.

Speymill Deutsche Immobilien Company raised £170m in its flotation on the London Stock Ex-change in March 2006, and a further €250m through a C share placing in May 2007. The fund SDIC is domiciled in the Isle of Man. pie (Full story first published in PIE 155, 1 March) ph

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weekly investor newsletter Volume 6 | Issue 153 | 15 February 2010

INSIDE ❱❱〉

Berlin GSW IPO held up by city’s Senate

France’s Klepierre profit hit by debt costs

French housing attracts increased investment

Sweden’s Hufvudstaden loss, sees better 2010

European prime supply, demand to move to balance

Finnish Citycon narrows 2009 loss, finances stable

Rent declines halt in London, Oslo, Warsaw

Rabobank’s Bouwfonds halts house fund inflows

French REIT Silic boost net 15%, raises div.

Orco wins bank extension, nears court ruling

OUT NEXT MONDAYPIE Online

Weekly 154

Aberdeen’s German open fund writedownsparks TMW Pramerica fund re-closureLast week’s sudden 22% fall in certificate values in German property fund Degi Global after its near 14% portfolio depreciation by manager Aberdeen Asset Management has thrown shockwaves into the open-end real estate fund community, sparking a run that forced Pramerica to re-close its TMW Im-mobilien Weltfonds just two months after re-opening. (See inside pages for full story)

French SFL portfolio down 8%, operations improveFrench office REIT/SIIC Société Foncière Lyonnaise, majority owned by struggling Spanish listed group Colonial, marked its portfolio down nearly 8% in 2009, bringing in a second net loss, but said operating results improved further, with rising rental income and lower costs. (See inside pages for full story)

German office values resume rise – JLL’s VICTOR Jones Lang LaSalle’s VICTOR valuation index of prime office property in the Big Five German cities rose by 1.8% in the fourth quarter against 3Q09, reducing the 12-month value slide to 1.4% from nearly 13% in 2008. For the first time since the start of the downturn, all five conurbations had posi-tive value growth. (See inside pages for full story)

ProLogis European cuts loss, ends de-leveragingProLogis European Properties, a Luxembourg-based listed fund owner of distribution facilities, nar-rowed its net loss for 2009 to €311m from €578m in 2008, but reported a profit in the fourth quarter, turning round successive losses, and said its deleveraging is completed. “By addressing our debt matu-rities and paying down a significant part of outstanding debt, we have .. put PEPR on a firm footing for the future,” said CEO Peter Cassells. (See inside pages for full story)

Unibail-Rodamco posts wider 2009 net loss,but sees recovery signs at 2010 startFrench-Dutch REIT Unibail-Rodamco, the largest listed property company in Europe, posted a 7% rise in recurring earnings per share in 2009 but a wider net loss of €1.47bn, against €1.12bn in 2008. It marked the portfolio down another 2.7% from June to €22.3bn, having made €2.3bn in valuation movements and disposals over the year. “While 2010 starts with tangible signs of recovery, it will be a year of transition, with … limited deliveries of new assets,” the group said. (See inside pages for full story)

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weekly investor newsletter Volume 6 | Issue 154 | 22 February 2010

INSIDE ❱❱〉

Deutsche EuroShop halves profit; FFO higher

France’s Icade profit up 69% on disposals

European banks’ lending sentiment improving

Kungsleden posts robust ’09; sees challenging 2010

Union pays Sonae, Euris €316m for Berlin’s Alexa

French Lucette divests Colisée; price said €160m

French mall REIT Altarea sees revenues stable

French SCPI funds’ capi-talisation climbs 10%

Unibail-Rodamco sells five Dutch malls for €235m

AEW Europe eyes doubling investment to €3.5bn

OUT NEXT MONDAYPIE Online

Weekly 155

Asian investors, including Chinese, Indians looking at German property – King SturgeAsian investors are becoming increasingly interested in German commercial property, said the head of King Sturge Germany Sascha Hettrich. Chinese investors are checking the market for potential invest-ment, while India-based investors, particularly families, are already active. “Chinese investors are looking around now, knocking on a lot of doors and informing themselves, while we have seen quite a lot of Indian-source capital invested here already over the last three years,” he told a news briefing in Frankfurt. (See inside pages for full story)

Global CRE transactions slide 30% in 2009 Global commercial real estate sold in 2009 fell 30% to $381bn, with nearly 11,000 properties trans-acted in deals above $10m, down 40%, says research firm Real Capital Analytics. China was the only country to post a significant gain, up 139 % to $156bn, some 41% of global volume. Without it, volume would fallen 52%. (See inside pages for full story)

French FdR narrows loss, recurring result up 7%One of the largest French REIT/SIICs Foncière des Régions more than halved its net loss in 2009 to €262m, with the shortfall caused solely by a further writedown in its portfolio of €332m, while net recurring income rose nearly 7% to €304m. CEO Christophe Kullmann said FdR is targeting new growth in net recurring income in 2010. (See inside pages for full story)

German house prices rise in January – HypoportGerman house prices are showing signs of recovery following steep falls last year, and in January were in aggregate just 0.8% below year-ago levels, according to the Berlin-based Hypoport group. Its HPX index rose 0.3% in January alone, its largest climb in six months. Demand is being helped by positive economic developments, low interest rates, a lack of alternatives and the fear of inflation, Hypoport said. (See inside pages for full story)

Dutch REIT Corio narrows loss; direct result up 7%Dutch shopping centre REIT/FBI Corio reported a 2009 net loss of €132m, narrowing the €240m loss from 2008, but saw its direct result rise nearly 7% helped by rental income. Portfolio depreciation reached 6.3%, and it is recommending a dividend. “After a disastrous year in financial markets in 2008, 2009 was the year of the aftermath,” said CEO Gerard Groener. (See inside pages for full story)

Last week to enter MIPIM with Property Investor EuropeThe European real estate sector is reviving after the crisis and restructuring fast to meet new challenges. At this crucial moment, you need visibility

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weekly investor newsletter Volume 6 | Issue 155 | 1 March 2010

INSIDE ❱❱〉

Barcelona office lettings seen expanding

Hamburg’s TAG makes 2nd strategic investment

MGPA winds up $480m Global 1 with strong returns

Germany’s Fair Value narrows loss, sees value upturn

Aareal posts lower operating results but uptrend

Germany’s WGF on way to EU bonds’ passport

NL’s Heijmans well positioned for difficult year

Dolphin wins €100m loan for Greek, Cypriot projects

OUT NEXT MONDAYPIE 156 EditionMIPIM Special

Hamborner becomes third German REITThe Duisburg-based listed office and retail property group Hamborner in late February became Ger-many’s third Real Estate Investment Trust, transferring into the segment some 29 months after the first, alstria office and Fair Value, opened the sector in July 2007. (See inside pages for full story)

Invesco makes Accor, Stockholm investmentsGlobal investment manager Invesco Real Estate has announced nearly €237m of acquisitions, buying five hotels from French hotel group Accor for €154m and making its second major investment of 2009 in Stockholm, buying the Paradiset 29 office and retail property for €82.5m. (See inside pages for full story)

Norwegian Property to split into two firms Oslo-based Norwegian Property, the four-year-old listed hotels and offices company struggling against high debt since the global crisis hit, is to begin a process of splitting into two separate firms grouping each asset type. It also reported a 25% rise in pre-tax profit for fourth quarter. CEO Olav Line, appointed last year, said NPRO’s fourth quarter reflected stable, good operations, and satisfac-tory cash-flow. (See inside pages for full story)

CA Immo eyes €500m for German expansionVienna-based listed CA Immo has up to €500m available for investment this year and is focusing on expanding in Germany by taking over smaller firms, portfolios or leased properties to enhance rental income, say its top officials. CEO Bruno Ettenauer and CFO Wolfhard Fromwald said the firm is actively looking for income generating investments to enhance day-to-day business. (See inside pages for full story)

Writedowns push French Nexity to €50m net lossListed French firm Nexity, the nation’s largest integrated commercial and resident property develop-ment group, posted a €50m net loss for 2009 as a result of €122m of writedowns in assets acquired by its services and distribution businesses between 2006 and 2008. But CEO Alain Dinin said the out-look for these businesses remains favourable. (See inside pages for full story)

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mature, says Colliers Bulgaria.Price falls are expected to

be steepest at the beginning of the year after prices

across all property sub-markets dropped by 20% in 2H09.

Growth in supply slowed to almost half

the 2008 rate. Other realtors expect Bulgari-

an housing to bottom out later this year, though

they disagree on when prices could turn higher. Tihomir Tsa-

kov of realtor Aristo sees prices bottoming in mid-2010, remaining stable in the following

months and then starting to pick up, rising by at least 10% by year-end. Realtors Address and Foros, like Colliers, see a further 10% drop before stabilising, and do not expect any increase in 2010. pie

European housing markets less distressed than USWhile an end to the housing boom in Europe has given way in some markets to increases in arrears and repossessions, they are by no means comparable to those experienced in the US, says the European Mortgage Federation.

In its latest monthly report, a survey drawn up by Susan Yavari, EMF Head of Economic Affairs, showed that of the 10 countries examined, five showed stable rates of arrears and repossessions since 2005, showing no marked increases up to and in-cluding 2008. A second set of countries showed still relatively low rates of increase. Of these the UK ad-justed its forecast for arrears in 2009 downwards, re-flecting better conditions for borrowers’ ability to repay than initially forecast. “Two countries out of the sample of 10 were especially under pressure, com-ing off a period of high growth in house prices and housing supply

combined with rapidly rising unemployment and negative GDP growth. But even these showed an ar-rears rate which still did not reach a third of the levels experienced in the US,” Yavari said, where 9.8% of total residential loans were delinquent in the third quarter of 2009.

“Of course, this should not be an invitation to complacency. It is, however, evidence of responsi-ble lending behaviour by lenders in Europe, and testifies to the impact of industry and government

A European Mortgage Association study says European home loan arrears and reposes-sions are nowhere near as high as in the US.

SHoppINg CENtrES / rEtaIl

Commerz Real pays €92m for first French mallCommerz Real, the fund manager of the Commerz-bank group, has expanded its French real estate port-folio by adding a first shopping centre - a fully-let mall in downtown Toulouse for an investment vol-ume of some €92m.

The property, which has almost 13,000 sqm in re-tail space, is earmarked for the hausInvest europa open-ended real estate fund and was sold by a fully-owned unit of French REIT Altarea . Said Commerz Real Board Member Hans-Joachim Kühl: “The city is renowned for its aerospace and information tech-nology. Due to the high density of companies and a comparatively low unemployment rate, the region is characterised by high spending power. In recent years, the rent rates of retail venues remained quite stable despite economic upheavals… we have reason to expect attractive growth potential.”

Recently fundamentally restructured, the mall in-cludes 50 stores that cover a wide spectrum of well-known French and international retailers. Four metro stations are located within walking distance. pie

S-Immo opens Bucharest mall, Sofia to followListed Austrian group Sparkassen Immobilien at end-February opened its €200m Sun Plaza mall in Bucha-rest with Romanian-French EMCT project partner, and aims to open a €210m Serdika Center office and shopping project with Germany’s ECE in Sofia, Bul-garia, this month.

Board member Holger Schmidtmayr told the PIE CEE Property Breakfast in late February that the mall had 68,000 visitors on the first day, well above expectations, and its anchor French hypermarket Cora also reported turnover over forecast. The cen-trally-located Sun Plaza is Romania’s largest, with 80,000 sq.m. of GLA and over 130 shops, and is 96% leased. Serdika offers 51,000 sq.m. of lettable space on three levels to house some 220 shops, and is fully let. It also has 32,000 sq.m. of office space on top of the project. Schmidtmayr noted the Bucharest malls also offers office space of some 10,000 sq.m. but this space is not yet let. pie

Union pays Sonae, Euris €316m for Berlin’s Alexa Hamburg-based Union Investment, the fund man-ager of the German cooperative banking network, is paying Lisbon-based Sonae Sierra and the French Foncière Euris/Rallye €316m to take a 91% stake in the Alexa shopping centre in Berlin’s Alexanderplatz.

The two sellers each owned 50% in the 180-unit shopping centre on Berlin’s largest and busiest central square, and Sonae, which will continue to be respon-sible for centre management, intends to exclusively hold the remaining 9%. The mall will be placed in Union’s UniImmo: Deutschland open-ended fund.

Offering around 43,000 sq.m. of retail space, the five-storey Alexa is fully let on long-term leases to retailers including MediaMarkt, Edeka, H&M and Zara. It opened in autumn 2007 and, with some

14m visitors in 2009, is already a dominant factor in Berlin’s retail market. “Alexa is a sustainable invest-ment in every sense of the word,” said Union Invest-ment Real Estate board member Frank Billand. “Its location quality, attractive shopping environment and high income potential are a perfect fit with our long-term investment strategy for the retail seg-ment.” Added Sonae CEO Álvaro Portela: “This agreement reflects the high quality of Alexa as well as our long term business strategy of recycling capital for future growth while keeping a stake in the prop-erty and its management.” Union last year invested over €1.6bn, including some €600m in the retail segment, making it one of the biggest cross-border investors in Europe. In the Alexa deal it was advised by broker Jones Lang LaSalle. pie (Full story first published in PIE 154 on 22 February)

Unibail sells five Dutch malls, buys Simon assetsFrench-Dutch shopping centre REIT Unibail-Ro-damco has reached agreement on the sale of five Netherlands retail malls to Dutch listed property fund Wereldhave for €235m. The move came just days after it announced a ground-breaking deal to buy part of Simon Property Group’s portfolio in Eu-rope for €715m.

The sale of the five dutch malls, which will give U-R a capital gain relative to the book value of the assets, forms part of its strategy of focusing on large shopping centres. The portfolio being sold consists of five malls with a total GLA of 60,000 sq.m. in the Dutch cities of Eindhoven, Utrecht, Roosendaal, Purmerend and Capelle aan de IJssel. The sale of the Overvecht shop-ping centre in Utrecht remains conditional.

In the earlier deal, U-R, the largest listed property company in Europe, is buying Simon Ivanhoe, a jointly-held unit of Simon, the largest US retail mall REIT, and Ivanhoe Cambridge. Simon Ivanhoe holds shares in seven shopping centres in France and Po-land. Unibail-Rodamco has also entered a JV agree-

ment for Simon and Ivanhoe Cambridge to jointly retain 50% interests in five French retail develop-ment projects, which it will now develop. CEO Guil-laume Poitrinal said the firm said will fund the acqui-sition from bank facilities. “This transaction represents a unique opportunity to reinforce our presence in the large shopping centre segment, in French and Polish capital cities,” he added.

The largest asset in the portfolio is Arkadia which, U-R said, compliments its portfolio in Warsaw. Arka-dia opened in October 2004 and with a total retail area of 103,128 sq.m. is among the largest malls in central Europe. Development projects include Les Portes de Gascogne in Toulouse, Les Terrasses de Poncy, Poissy, Le Cannet, Mandelieu-La Napoule, and Saint Geours de Maremne.

Separately Unibail-Rodamco is joining the EURO STOXX 50 index of leading Eurozone shares – re-placing German carmaker Volkswagen, which is be-ing removed from the index under STOXX Ltd’s fast exit rule. pie (Full story first published in PIE 152 on 8 February)

Bulgaria sees 18 shopping malls opening in 2010Larger cities in Bulgaria are seeing a strong expansion in new shopping malls despite the current economic situationm and 18 malls are expected to open nation-wide during 2010, according to a survey by property consultants GVA Sollers Solutions.

Most new malls are expected in the capital Sofia but also in the cities of Varna and Ruse. Among up-coming openings, the 50,000 sq.m Serdika Mall Center opens in Sofia mid-March and Carrefour, the second largest supermarket chain worldwide, has a new development to open in central Sofia in spring. This year’s brisk activity contrasts with 2009 when only three medium-sized mall opened as the eco-nomic crisis forced the postponement or freezing of many projects. At the beginning of 2010, Bulgaria had a combined shopping mall area of 243,460 sq.m.

Shopping centre specialistCreating a unique, vibrant retail experience www.sonaesierra.com

Commerz Real first shopping centre acquisition is the 13,000 sq.m. fully-let Espace Saint Georges in downtown Toulouse for an investment volume of €92m.

SHoppINg CENtrES / rEtaIl

However, a surge of completed development in the first two months boosted this by 30%. Despite this expansion, Bulgarian per capita mall space remains low by European standards. pie

Moscow retail mistakes shown from past yearsDeepening of the financial crisis impact on Russia in 2009, including freezing of projects and retailer defaults, have revealed weaknesses in the sector and its players as well as mistakes in project development during the years of extensive development, says Colliers International.

In 2009, supply of retail property in the Russian capital surged by almost 900,000 sq.m. to end the year at 4.86m sq.m. or total GLA of 2.54m, it said in a new study. Despite the difficult situation, 2009 new brands included furniture and household goods hypermarket Kika, department store H&M, River Island, Ipekyol, New Look, Bebe, Gap, Nucleo, Cen-tro, and Fun City. Other operators planning to enter Moscow include UK department stores Debenhams and Harvey Nichols, British supermarket Sainsbury’s, fast food chain Burger King, clothing brands Tally Weijl and Li Ning, and economy footwear chain Pay-less Shoes. France’s Decathlon intends to launch its new hard discounter Koodza, while Castorama is launching City Format, and Auchan plans its new Raduga economy brand. Nike plans its first own shops in Russia, along with franchise stores.

Decline in retail rents began in late 2008 and reached bottom in mid-2009 at between 30% and 50% down

from the peak. But rents stabilised by the end of 3Q09, and owners of shopping centres stopped offering dis-counts. However, many properties are still encounter-ing difficulties finding tenants and continue to offer considerable letting discounts. The average vacancy reached 15% and mid-year but growing demand for retail space was only 5%-7% by early December. pie

French mall REIT Altarea 2009 revenues stableFrench shopping centre REIT/SIIC Altarea Cogedim recorded stable 2009 revenues but said it expects strong growth in 2010. Revenues fell 0.6% to €940m ahead of full annual results in mid-March but it said: “On the basis of its business performance in 2009, Altarea Coge-dim will see very strong revenue growth in 2010.”

Rental income from shopping centres rose 21.3% to €154m, mainly as a result of the opening of a number of high-yield properties that were already 100% let, such as the Wagram, Lyon–Carré de Soie and Crêches-sur-Saône malls. Altarea last year invest-ed €235m in developing new shopping centres and sold €110m of retail assets in 2009.

The group’s Cogedim subsidiary saw residential de-velopment revenues decline 7.7% but reservations up 59%, back above pre-crisis levels. “On the basis of the sharp increase in residential reservations in 2009, Coge-dim can be expected to see strong revenue growth in 2010 and particularly in 2011, with the start of building works on 4,400 homes by Cogedim in 2010, ie 50% more than in 2009,” the group said. A backlog equiva-

lent to 19 months of revenues at end-December points to strong revenue growth in housing.

Office property revenues de-clined 12.6% to €152m. The group recorded take-up of €140m excluding tax for various development projects or as del-egated project manager despite the very severe decline in the in-vestment market. It also com-pleted eight office properties with a total floor space of 150,000 sq.m. in 2009. “Sub-ject to constant economic con-ditions, Altarea Cogedim should see significant growth in its main indicators in 2010,” said Chairman Alain Taravella. pie (Full story first published in PIE 154 on 22 February)


DLA Piper is an international legal practice, the members of which are separate and distinct legal entities.For further information please refer to www.dlapiper.com/structure | A list of offices can be found at www.dlapiper.com

BEYOND ADVICE, BEYOND BORDERSWhen it comes to real estate law, DLA Piper delivers. Commercial and innovative, we’re all

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101112131415

Rank

German retail space rents, 1a locationsIncluding forecast, 1H10

Source: Kemper's Jones Lang LaSalle

City 2008 2009 1H10f 10 yearchange

5 yearchange

MunichFrankfurt / MainDüsseldorfHamburgStuttgartBerlinCologneDortmundHannoverMünsterMannheimNurembergFreiburgWiesbadenLeipzig

300260225215230220215210180150140125120130115

310270235230230220215210180150140135130130115

+44.2%+50.8%+39.1%+28.5%+36.1%+7.3%

+20.1%+32.1%+25.9%+17.2%+13.8%+30.8%+18.2%+16.1%+12.7%

+24.0%+22.7%+27.0%+21.1%+12.2%+22.2%+10.3%+16.7%+20.0%+9.5%+7.7%

+27.3%+16.1%+4.0%+0.0%

310270235230230220215210180150140140130130115

Val-de-Marne is home to Orly airport (left) the second largest in Greater Paris, and Rungis, the world’s biggest fresh food market. Health, audio-visual (right), and finance are three industry sectors in focus.

CHaNgINg FaCE oF EUropE

pierre Paumelle, Val-de-Marne develop-ment agency investment director, says many businesses are already moving out of central Paris to the surrounding areas, and the improved transport infrastruc-

ture of the Grand Paris project will make such a move even more attractive. “A lot of companies are moving out of the centre of Paris for cost reasons and are look-ing for newer premises in much less expensive loca-tions - and the Val-de-Marne offers exactly this type of product,” he told PIE in an interview. The region will benefit from one of Grand Paris’ key transport compo-nents – the driverless Orbival metro line linking the main Greater Paris business and residential areas. The 140km figure-eight configuration will cross Val-de-Marne, providing a direct link to La Défense and the main airports. Planning for the Val-de-Marne section between Arcueil-Cachan and Val de Fontenay is more advanced than other parts of the network, although it still may not be up and running before 2020.

But Val-de-Marne can boast extensive transport links even before the arrival of Orbival. It is crossed by four motorways, five RER regional express railway lines and three Paris metro lines, one of which will be extended in early 2011. It also hosts the second-largest river port in Ile-de-France at Bonneuil-sur-Marne and, most im-

portantly, Orly airport which carries 23m passengers a year to more than 300 destinations across the world. These links and the region’s position on the doorstep of the French capital make it a very viable option for firms looking to relocate, and the region claims the lowest rents in Greater Paris. These average some €268 per sq.m. for real estate of international standing compared with €350 for Ile-de-France as a whole and about €500 for Paris central business district. Median purchase prices are around €2,100 per sq.m. compared with €4,100 for Greater Paris as a whole.

Val-de-Marne has a stock of some 3.5m sq.m of of-fice space, about 7% of total Ile-de-France - but it is expanding more quickly than the rest of the region, with office space up 18% between 1997 et 2008, com-pared with 11% in the French capital. It also has the lowest vacancy rate of any department in Ile-de-France, around for just 5% in 2008, Paumelle notes. Major companies that have moved corporate headquarters into Val-de-Marne from Paris include French bank LCL (formerly Crédit Lyonnais), which moved into an 80,000 sq.m. building in Villejuif in 2008. Retailer FNAC, the Leclerc hypermarket chain and Japanese electronics company Ricoh have also all moved nation-al head offices there as well. Several banking and insur-ance groups that have also relocated back office opera-


tions to regional centre Fontenay-sous-Bois include BNP Paribas, Société Générale and Axa. Société Géné-rale is also moving its trading room from La Défense, eventually encompassing 10,000 employees. A direct RER line means Fontenay-sous-Bois is just 20 minutes from Paris CBD and 30 minutes from La Défense.

Val-de-Marne is looking to significantly expand its offering of business premises through a number of ma-jor projects. “The amount of office space is going to increase considerably and that will attract a lot of com-panies and a lot of employees,” says Paumelle. Orly-Rungis is already the second biggest business pole in Ile-de-France after La Défense, and has the advantage of including Orly airport, the tenth largest airport in Europe, and the world’s biggest fresh food market at Rungis, home to 1,400 agri-food companies with combined sales revenues of €7.3bn. And the area is earmarked to be one of the key development zones in the Grand Paris plan, notably through the Coeur d’Orly project, which will cover a 130-hectare site ad-jacent to Orly airport.

French airports authority Aeroports de Paris is the initiator of the Coeur d’Orly project, which will offer 230,000 sq.m. of office, hotels, a convention centre and an international fashion centre by 2015, with the aim of strengthening its position as the leading eco-nomic hub in the south of Ile-de-France. The first phase is being developed jointly by ADP, Altarea Cogedim and Foncière des Re-gions and includes 108,000 sq.m. of offices, 34,000 sq.m. of shops and 18,000 sq.m. in a 4-star hotel complex. In addition to the Or-bival, transport links to Orly-Rungis will benefit eventually from the construction of a high-speed railway (TGV) station. And

in the shorter term a new tram line will, from 2013, connect Orly to the metro system at Villejuif.

At the same time, the French REIT/SIIC Silic con-tinues to develop its business park in Rungis and is adding new office building space at a rate of 15,000-20,000 sq.m. a year. Currently around 375,000 sq.m. of space has been built on the 63-hectare site, with around 300 tenant companies. It aims for a total of 500,000 sq.m. Meanwhile, a very different kind of de-velopment is planned on the northern edge of the Val-de-Marne. There, the Ivry Confluences project, where the Seine and Marne rivers meet, is intended to regen-erate the riverside area overlooking Paris. Some 1m sq.m. of buildings are to be developed on the 145-hec-tare site, with 50%-55% earmarked for commercial and 30%-40% for residential property.

The Val-de-Marne development agency is particularly looking to attract businesses in key industries in which it already has a concentration of activities - with the aim of becoming a decision-making hub in these sectors. One focus is health, with the department hosting both biotechnology start-ups and large international groups like Sanofi-Aventis. It also has a network of 51 hospitals, five university hospitals and 74 public research laborato-ries - as well as the Gustave Roussy Institute in Villejuif, the leading European cancer research centre.

Another sector is audio-visual. Val-de-Marne is the location for more than 1,000 firms encompassing con-tent creators to equipment manufacturers and distrib-utors. Firms include Société Française de Production, Nikon and Kodak. The move out by financial groups’ back offices means finance has also become another key segment for the department, now accounting for over 16,000 jobs. To support commercial activity, Val-de-Marne als ooffers a number of major research cen-tres and higher education institutions graduating more than 45,000 students each year. These include the multidisciplinary Paris Est Val-de-Marne university,

the elite École Normale Supérieure in Cachan and the National Audiovisual Institute (Institut National de l’Audiovisuel) in Bry-sur-Marne. pie Story by PIE Editor-France Steve Whitehouse


This regular monthly section of pIE takes the European investment challenge further upstream – into major real estate develop-ment projects that are literally changing the face of the built environment on the European continent. The section is designed to provide an interface between developers and project managers wishing to reach a global investor audience, and institutions seeking to track the most interesting development- related investment opportunities. Developers, owners and managers are encouraged to contact us via [email protected] or through the website at www.pfeurope.eu.

Val-de-Marne to benefit from Grand pariswidening rail infrastructure, lower costsMost attention surrounding President Nicolas Sarkozy’s Grand Paris project has focused on La Défense, Saint-Denis, Le Bourget and Roissy-Charles de Gaulle. But the department of Val-de-Marne to the south-east will also be a key beneficiary.

“A lot of

companies

are moving

out of the

centre of Paris

for cost reasons

and Val-de-

Marne offers

exactly this

type of product”

pierre paumelle

The proposed Orbival transit net-work will connect Val-de-Marne region in the southeast even more closely into GreaterParis.

Pierre Paumelle

CHaNgINg FaCE oF EUropE

Not only in central Europe but in the whole of the European Union, Poland was the only country with GDP ex-pansion last year, of 1.7% - while for 2010 real economic growth is even

forecast exceeding 2%. It is a big country: 312,679 sq.km. of area and a population of nearly 40m. The sixth most populous member of the EU, which it joined in 2004, it is also the biggest accession nation, alongside the Czech Republic, Slovakia, Hungary and the three Baltic States. Beside its capital Warsaw, with over 1.7m inhabitants, other important cities encompass Katowice, Cracow, Lodz, Poznan, Wro-claw - and in the northern TriCity comprising Gdansk, Gdynia, and Sopot.

Marek Koziarek, MD of Commercial Real Estate at Bank Pekao – a large Polish bank now part of UniCred-it - explains why Poland avoided recession: “On the one side this was due to chance; on the other, to fun-damentals. First, growth after EU accession was too short to allow Poles to become too optimistic; second-ly, the Zloty was not linked to the euro so we could easily adapt and became more competitive within the

European marketplace. Because of its size, Poland was also less vulnerable to cross-border capital movements, while its population has avoided high debt, especially in foreign currencies. We are ready to earn and spend money,” Koziarek says. “All this created two elements of stability: exports and internal consumption.”

This is not to say that Polish real estate has avoided the slowdown. Total real estate investment last year of close to €700m was the lowest since 2004, and compares to the record €5.2m in 2006, €3m in 2007 and €1.7m in 2008. Of this, international brokers CB Richard Ellis and Jones Lang LaSalle point out that a few major deals accounted for more than 60% of activity: the purchases of the office complexes Atrium City, Grzybowska Park, Marynarska Park - and in retail, the Mayland portfolio. The investment decline is eye-catching, but Koziarek points to the big picture: “The fact that investment transactions practically disappeared in 2009 was not due to the quality of assets in Poland but rather the lack of investment appetite all over the world.”

Of the large group of developers and investors in Poland, one of the most active internationals has been Austria-based ImmoEast, where Board Member


Manfred Wiltschnigg is optimistic on the nation’s prospects: “Sure, demand for offices has been lower but vacancy rates, rents and yield stabilised fairly early on,” he told PIE. ImmoEast, currently merging with major shareholder Immofinanz, has to date in-vested in 14 objects in Poland with a market value of €520m and a rental income around €44m per year. Two of its best-known are the IO-1 office complex in Warsaw’s Mokotow district, and the prize-winning Silesia City Center mall in Katowice in the South.

Belgium-based developer Ghelamco has been in Po-land since 1991 and has seen a lot of changes. Manag-ing Director Poland Jeroen van der Toolen sees the of-fice market now through its toughest times. “In 2008 and at the beginning of 2009 everybody was talking about falling stock markets and how big and long the crisis was going to be. But nowadays all prognoses are good. Therefore I am convinced that in 2010 business will pick up again.” Ghelamco has delivered more than 356,000 sq.m. across 21 projects in Poland, among them Marynarska Park. Among its current large-scaled projects are Warsaw’s Crown Square and Trinity Park III, and Katowice Business Point in Silesia. Says van der Toolen: “During the economic crisis many projects were cancelled or postponed, but the Warsaw office market last year saw the biggest supply of projects since 2000, with 260,000 sq.m., while demand fell 50%. This more than doubled vacancies to 7.2% while city centre rents slid by 20%, and by 10% on the periphery and suburbs. However even these figures are still good in comparison with other EU capitals.”

He expects 40% less space to come to market this year. The remaining 60% includes the 45,000 sq.m. Phase 1 of Poleczki Business Park near Warsaw airport, being developed by Austria’s UBM, active in Poland since 1997 and with a track record including such well-known buildings as Griffin House and Warsaw’s Hotel Intercontinental. “We started the development of Poleczki Business Park in September 2008,” UBM CEO Karl Bier remembers. “Given market conditions at that time you could call this very anti-cyclical be-haviour. But Poland is the most enjoyable market for UBM, so we did it anyway!” UBM’s confidence paid off. At the end of 2009, the quasi-public Agency for Restructuring and Modernisation of Agriculture leased more than 16,500 sq.m in 2009’s biggest letting. But demand has started in other regions, and UBM already has offices in Cracow and Wroclaw.

Wiltschnigg shares Bier’s view: “Large internation-al investors will look for Warsaw and especially for

core objects. But secondary destinations like Lodz, TriCity or Katowice are becoming more important, especially in the retail sector which is in very good condition in Poland.” Because large office schemes do not make business sense in secondary cities, activity concentrates on retail, hotels and mixed-use schemes - sometimes mixing office and residential. But Ghela-mco’s van der Toolen is optimistic about office as well: “During the next 3-5 years not only Warsaw but also other Polish cities such as Katowice, Cracow or Wroclaw will remain very attractive business destina-tions.” As proof he points to international logistics group UPS as tenants in Wroclaw’s Bema Plaza, from where its accounting centre serves not only Poland but also the rest of Europe.

Ghelamco in 2008 sold Bema Plaza to German in-vestment manager Deka Immobilien for its open fund Deka Immobilien Europa for €106m. But the acquisition far from saturated Deka’s appetite for Po-land. In 2009, it acquired the Tesco distribution cen-tre in Teresin and the Warimpex-developed andel’s hotel in Cracow, each at around €30m – and War-saw’s Grzybowska Park for some €70m. Another German open fund UniImmo, managed by Ham-burg’s Union Investment, bought Cracow’s SAS Radisson Hotel. But the London-based Macquarie associate MGPA Europe Fund III, whose portfolio already included the office tower Rondo I, developed by Hochtief in Warsaw made the biggest investment deal in Poland since 2007. It invested €187m in two shopping centres - Karolinka in Opole, and Pogoria in Dabrowa Gornicza. Combined with a sales option for Jantar mall in Slupsk, the total bill came to an eye-popping €236m. The three centres were devel-oped by the domestic group Mayland, which is backed by Goldman Sachs pie Story by Andreas Schiller, PIE Editor-in-Chief, Russia/CIS-CEE.


MIpIM 2010 honours poland’s growing attractiveness for property investorsPoland is the one European country that found a way through the global crisis with-out lurching into recession - one reason why MIPIM has chosen it as 2010 Guest of Honour. The nation is attracting a growing community of investors and developers.

The Rondo 1 tower close to Warsaw’s cen-tral station, developed by Hochtief and bought in 2007 by an MGPA fund, is the third high-est skyscraper in Poland and is located in a quar-ter that has seen sub-stantial commercial real estate development over the last decade.

Recent developments in Poland include Warsaw’s Intercontinental Hotel (top with the Palace of Culture visible in background), developed by Austria-based UBM, and current office developments by Belgium group Ghelamco - Crown Square (middle) and Trinity Park III (above).

CEE propErty BrEakFaSt

Recovery starts from core CEE; yields slippingRecovery in CEE property markets will take time and will starting in core central Europe and only later move south and east, with yields compressing more slowly than the rapid decompression when the crisis hit the region, panellists at PIE’s CEE Break-fast predicted.

“If rental levels stay stable in 2010, we’ll see pres-sure on yields,” said Bruno Ettenauer. “Core CE will go faster, while in SEE and Russia it will take time.” Michael Langler said developed legal systems in CE will aid renewed investment but in the southeast, the foreign investor lobby for reform is missing. SEE may already be open again for local players and expe-rienced Austrian developers but, he said, “I’m not so positive for big institutional investors.” But even non-core CEE has low sovereign debt, with Bulgaria at 15% of GDP and Romania at 21%. Unlike in Greece and some very highly indebted western na-tions, this should not constrain growth in CEE.

Holgar Schmidtmayr predicted deals in Bucharest will rebound from 2009’s dismal level, with growth also in more established locations like Prague - where even compression from 7% to 6% would be a lot. In

Bucharest, Sofia or Croatia, where prime yields are near 10%, outside investors will take longer to return. “I favour Bucharest and Sofia, and Prague the least because we’re counter-cyclical investors,” he said. To-masz Trzoslo said owners are holding property until prices rise, making yields academic. Warsaw prime is theoretically at 7.75% but nobody is selling.

Russia is a special case, the panellists agreed. Ett-tenauer commented: “You cannot automatically use experience in the CE region for Russia. I was disap-pointed, it proved the most unstable for us. Higher GDP growth is expected but the risks are higher.” Medium-term, panellists believe Russia and Ukraine will become attractive again. SEE is also interesting mid-term due. pie

Timing right to re-enter CEE; Chinese investors also seenCentral and eastern Europe property is back on in-vestors’ radar screens. Sentiment has turned positive again on selected markets, according to panellists at PIE’s CEE Property Breakfast.


“We are definitely seeing more interest,” said To-masz Trzoslo. “There was a trend 12-15 months ago when CEE generally had a bad press. The big change now is that investors look at particular countries; most are interested in buying in Poland and Czech Repub-lic. A few core investors look for risk-free opportuni-ties and can pay top prices, while others will take a bit more risk for higher returns, and opportunistic inves-tors are looking for significantly higher returns.”

Michael Langler signalled a new type of local in-vestor: “Former very successful managing directors who set up private businesses and raised funds are very active in Romania and in Sofia, and some in Ukraine… We have the first requests coming from Asia for Serbia and Ukraine. I’ve seen Chinese inter-est in Serbia, maybe because a Chinese delegation visited Serbia recently.”

New funds are being launched with a CEE alloca-tion, showing that end-investors have broadened their view beyond the West, said Holger Schmidt-mayr. Bruno Ettenauer noted the region has not overcome all problems and risks must be balanced against opportunities. But in general, “for the first time now I believe is the right time to invest.” Added Schmidtmayr: “it’s the perfect time to buy.” pie

polish, Czech markets seen pulling away from CEEMost property investors favour Polish and Czech mar-kets in CEE where fundamentals are now behaving like western markets, PIE’s CEE Property Breakfast heard. Poland, with its large population and strong, more self-sustaining economy staying out of recession, plus Czech Republic, are the most mature. They have become at-tractive to long-term investors focused on quality.

While each Polish deal now attracts 8-10 investors, tiny Slovakia’s economy, like the Czech, needs to cut dependence on the automotive industry but has the advantage of the euro. Hungary has been out of fa-vour due to its economic woes and needs to rebuild trust. Schmidtmayr said Sparkassen Immo made big writedowns on Hungarian assets but the nation is much more stable than people think. “If yields stay that way, I’ll be glad to expand in it; I think it’s gross-ly underpriced,” he said. He also favours the contrar-ian view - investing now in countries such as Roma-nia, Bulgaria, Serbia, Croatia. Sparkassen just opened Romania’s biggest mall and is about to open another in Sofia. “Generally you don’t make a lot of money by following trends,” he said.

Bruno Ettenauer noted Serbia has been neglected as the crisis arrived before investors had discovered the nation, and it has legal issues. But Belgrade office developments are renting fast. “For a quality build-ing, renting is better than in other cities in the re-gion,” he said. Tomasz Trzoslo argued that even a core investor could, for example, buy Bucharest’s best building at a higher yield as these markets will revive later. But smaller countries like Bulgaria pose a prob-lem for exits.

In terms of asset classes, the panel saw shopping centres as strongest as rapid economic growth boosts consumption among aspirant populations and at-tracts international retailers. But many carry currency risk where retailer costs are in euros and income is in local units. And some retailer bankruptcies are ex-pected this year. Trzoslo sees opportunities and activ-ity in almost all sectors, especially retail and office but not hotels. Generally, warehouses are neglected due to high vacancies but long-term leased, quality assets still offer a good investment in this class. pie


pIE’s CEE property Breakfast sees positive signs for eastern Europe

p roperty Investor Europe on 26 February

brought together five experts in London’s

West End to discuss the question: Does cen-

tral and eastern Europe offer attractive opportunities

in 2010 or are economic risks still too great? Held in

the offices of Jones Lang LaSalle, the PIE CEE Property

Breakfast attracted a record 100-plus, standing-room-

only audience. Panellists were: (far left) Bruno Et-

tenauer, CEO, CA Immobilien, Vienna; (2nd left)

Michael Kröger, Head of Real Estate Finance North-

ern/Central Europe at Helaba, Frankfurt; (3rd left) PIE’s

Allan Saunderson; (3rd right) Michael Lagler, Real Es-

tate Partner, Schoenherr Lawyers, Vienna; (2nd right)

Holger Schmidtmayr, Board Member, Sparkassen Im-

mobilien, Vienna; and (far right) Tomasz Trzoslo, Head

of Capital Markets-Central Europe, Jones Lang La-

Salle, Warsaw. The following is a resumé of the main

topics discussed and the experts’ views on them.

Michael Kröger (top) said Helaba aims to increase CEE lending and has requests from firms and investors seeing opportunities, though CA Immo’s Bruno Ettenauer (above) cau-tioned that further de-lever-aging could brake lending.

PIE’s CEE Property Breakfast (above centre) attracted record attendance at Jones Lang LaSalle’s London-West End premises in late February. JLL’s Tomasz Trzoslo (top) said CEE is back on investor radar screens, with Polish, Czech markets favoured. Sparkassen Immo’s Holger Schmidtmayr (above left) sees CEE as a contrarian play. Audience members (above) also canvassed panellists’ views.

CENtral & EaStErN EUropE

Warsaw’s GTC swings to 2009 loss of €139mWarsaw-listed Polish developer Globe Trade Centre swung into a 2009 net loss of €139m from a 2008 net profit of €189m, due to a large €172m writedown on its portfolio versus a 2008 indirect profit of €236m. However, the firm reported operating reve-nues up 36.5% to €156m.

Supervisory board Chairman Eli Alroy said GTC’s operational results confirm its ability to perform ef-ficiently in an economic downturn and to raise new financing and complete large-scale, investment-grade projects. “We believe that CEE property mar-kets will start recovery in 2010, both in terms of ten-ant demand as well as investment transaction volume,” he said. The group will invest €200-300m this year. It will start construction of office buildings in Warsaw and Bucharest, and shopping malls in Osijek, Croatia, and Burgas, Bulgaria. It will also use liquidity and secured debt to explore new opportu-nities in markets where it operates.

GTC’s long-term debt ratio to total assets was 54% at year end, with just 5% of debt maturing in each of the next two years and 56% in 2015 and onwards. Total assets were valued at €2.6bn, with investment property at nearly €2bn at end-2009. It saw strong rental growth and margin on operations rose to 77% from 74%, mainly due to higher occupancy in newly completed projects. Residential sales income advanced by 42% to €60m. CFO Erez Boniel said GTC contin-ued to secure funding at low cost, raising over €400m of new loans through 2009 when the average cost of debt was 6.1%. GTC operates in Poland, Hungary, the Czech Republic, Romania, Serbia, Croatia, Slova-kia, Bulgaria, Russia and Ukraine. pie

poland’s Echo 2009 net profit, revenues stable Warsaw-listed property developer and investor Echo posted a slide in 2009 net profit of 2.7% to PLN102m (€26m) and about unchanged revenues of PLN430m (€110m). The total value of Echo’s assets exceeded €1bn for the first time.

Echo said income from sales of residential projects and lease of office and commercial areas boosted rev-enues last year. In 4Q09, receipts were booked from final agreements on four residential projects, includ-ing the third phase on Inflacka and second phase on Zwyciecow streets in Warsaw, and from projects in Poznan and Bilcza near Kielce. Another important factor was actualisation of fair value exchange rate adjustments, net operating income, and property valuations including its Avatar project in Cracow, and Park Postępu in Warsaw and Malta Office Park in Poznań.

Equity capital was over €400m, up 5.5% from a year earlier, and Echo had some PLN170m (€43m) in financial and cash assets at end-2009. pie

Serbia’s Atlas in Montene-gro project with Abu Dhabi Serbian developer Atlas has bought a former military hospital in Meljine, Montenegro, where it plans to develop a 92,288 sq.m. health and tourist complex project in a joint venture with Capital Investments, associated with the Abu Dhabi royal family.

Controlled by Dusko Knezevic, Atlas paid some €24m to become sole owner of the hospital, allowing it to begin the first reconstruction phase of the Meljine Health and Tourist Complex. The legislative committee of Herceg-Novi had already approved the urban plan, PropertyXpress portal reported. Atlas is the investor and developer in the JV with Capital. The complex will be developed on 49,345 sq.m, and will include an eight-storey hospital, seven-storey ho-tel, convention centre and spa facilities, as well as residential apartments. pie

Investor interest revives €750m Bucharest project Romanian businessman Alexander Hergan’s Avrig 35 property development group said it is starting on the €750m Pallady Shopping Centre project in Bucharest Ph

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in partnership with the Cascade group, thanks to re-vived investors’ interest in Romania since late last year.

Pallady will be located on 30 ha. at Theodor Pallady Boulevard, bought four years ago for €20m. “Funds which had disappeared from the market are now ac-tive,” Hergan told the Business Review portal. Interest from retailers has also picked up. Added Cascade’s

Alex van Breemen: “Everyone is knocking at the door now, and retailers want to be in the east of the city.”

French retailers Auchan and Decathlon have signed leasing agreements for the centre, due to open in 2012. Initially intended to include office and residential for an investment of €750m, no new cost assessment has been given. After the shopping centre phase, “the mar-


The future for owner operated hotels in Slovenia lies in global brandingBy Jacqueline Stuart, Director, Slovenia Invest, Ljubljana


Developers of new hotel properties in

Ljubljana are in discussions with inter-

national operators, and as branded

properties open up it is likely that owner-operat-

ed properties will reconsider their options in or-

der to compete in the global marketplace. The

reason is that there is a clear worldwide trend to

move from an owner-operated business model to

a professional branded operator model. Big hotel

names like Hilton, Marriott and Holiday Inn no

longer own their properties, they concentrate on

what they are good at: getting guests into the ho-

tels and providing superior service. The proper-

ties have been long since sold to institutional and

other investors. Here’s the interesting thing about

hotels. They are not valued according to square

metres or location like other property assets; their

value depends upon revenue and profit. So why

exactly do hotel investors hire international op-

erators to run their properties? After all, these in-

ternational brands take a significant share of rev-

enue in return for their name above the door. The

answer is that hotels have high fixed costs regard-

less of guest numbers so a small rise in occupancy

can have a large impact on profit.

Around 40% of hotels in the UK and 50% of

hotels in France are now branded so why are

things different in Slovenia? Only two hotels in

the country are run by specialist operators, the

Kempinski in Portorož, and the Austria Trend in

Ljubljana. “The hotel industry in Slovenia is at an

early stage, hotel owners think they can do it

themselves and do not appreciate the added

value of a brand,” comments Annabel Dolenc

from BD Group, a Ljubljana hotel consultancy

that represents brands such as Banyan Tree. “Ho-

tel properties in a good location could definitely

improve occupancy and hence profitability by

handing management over to international op-

erators. The additional value from a professional

operator is knowledge transfer. They train staff to

provide a superior and quality service which

adds to the guest experience,” she adds. Philip

Camble, of London-based Cushman and Wake-

field Hospitality says the advantages of interna-

tional operators are clear: Marketing muscle, res-

ervations platforms, training and operational

manuals, constant monitoring of service levels

and asset management. “The trend across Eu-

rope is to see branding on a greater proportion

of hotels, either with operator agreements, lease

or management contracts or franchises,” he says.

“The upscale end of the market tends to opt for

management contracts. At the luxury end there

are still a few hotels operated standalone, and at

the lower end many family run establishments.”

One hotel group in Slovenia that has adopted a

different approach is Hotel Slon, which has a prop-

erty in the centre of the Slovene capital Ljubliana

and two on the shores of Lake Bled, one of the big-

gest tourist attractions. They operate their proper-

ties but use the booking platform of Best Western,

an internationally recognised name with a world-

wide reservations system. Ljubljana Slon Manager

Gregor Jamnik says the major advantage of the al-

liance is the brand recognition. “Our hotels are vis-

ible in all GDS systems worldwide, covering air-

lines, car rental companies and hotel booking

portals… The brand guarantees mid-price quality

and we have benefited from business travellers

who would previously have chosen luxury hotels.”

Last year he took 20% of bookings through the

international platform, and occupancy was 20%

higher than competitor 4-star hotels.

One international operator looking at Slovenia

is Hilton. It has an impressive pipeline of 57 hotels

to open in Europe by 2012, and believes owners

are attracted because of the strength of the brands

and leading management expertise and brand

performance support, which helps to outperform

competitor hotels in revenue, profit and market

share. “All Hilton owners benefit from the ‘Hilton

Engine’, which includes a worldwide sales organi-

sation, high traffic website/booking engine, and

inclusion in the Hilton Honours loyalty programme

with more than 25m members,” says Dan Corfield,

from Hilton’s press office in London. Azalea Hotels

is a regional operator headquartered in Vienna

with properties in Montenegro, Croatia and Aus-

tria. The group works to come up with a unique

best fit solution for each property, and they see

great potential in the Slovene hotel market. Ac-

cording to CEO Christian Piber Azalea believes a

gross operating profit of 50% is possible in Ljublja-

na, with 35% on the coast and in spa areas, de-

pending upon the size and type of hotel. js

Jacqueline Stuart can be reached at

[email protected] Warsaw’s GTC swung to a loss in 2009 as writedowns far overrode operating profits, but Polish values should do better this year.

CENtral & EaStErN EUropE

ket will tell us what the next phase will be,” says Her-gan. Bucharest residential property has not yet hit bot-tom yet as the market remains saturated, whereas demand for office and other commercial exists.

Avrig 35 built the Charles de Gaulle Plaza project in Bucharest, 50% sold to CA Immo and subsequently 100% to GLL investment fund. Its most recent project, Iris Shopping Center in eastern Bucharest was sold to Aberdeen’s Degi funds for €147m. Avrig 35, which owns over 100 land plots throughout Romania, was set up in 1999 by four American investors including Hergen. Cascade is a unit of Dutch-registered East and Central European Venture Capital. pie

AIM’s Hungarian Ablon starts polish projects AIM-listed Hungarian developer Ablon is to plan-ning to start construction of an office project in Po-land this spring in its Karolkowa Business Park project in Warsaw’s Wola district.

Karolkowa, on a 5,562 sq.m. plot, will have two 11-storey office towers, connected by a 7-storey building. The project will have some 15,000 sq,m, of office and retail space and six apartments in two tow-ers, the Eurobuild portal reported. It should be com-pleted by end-2011 or early 2012, with the developer currently engaged in securing the financing.

Ablon has two other projects planned for Poland. In the Włochy district of Warsaw it is planning a 45,000 sq.m. office park. On the bank of the Martwa Wisła river, it owns a site for which it is planning a luxury

residential project, including a hotel and a marina. Ab-lon is a Guernsey incorporated holding for a group of commercial and residential property developers in Hungary, Czech Republic, Romania and Poland - pri-marily active in Budapest and Prague. pie

Wave of hotels due for completion in Hungary

Despite the downturn in the Hungarian tourist sec-tor, hotel development has continued unabated even if the number of guests and stays fell by 8% last year, says Colliers International.

The average hotel occupancy rate in Budapest ho-tels was 49% laset year, with room prices staying un-changed or declining slightly. Due to development projects initiated before the start of the crisis, a number of hotels are due for completion in 2010, in-cluding the 4-Star Marriott Courtyard, the Alta Moda Fashion Hotel, the Eurostars Hotel and the Conti-nental Hotel Zara. In the 5-Star segment, Thermal Hotel Rácz and Buddha-Bar Klotild Palace are to en-ter the market. These hotels will add 1,000 new rooms to Budapest’s stock. pie pie

proLogis to focus on poland lettings, may sell land European logistics and warehouse group ProLogis European Property will focus in Poland this year on leasing vacant space, and may sell part of its land bank, says CEE MD Ben Bannatyne.

Land originally secured for the second phase of an industrial park in Szczecin, is likely to be carved up and sold to owner occupiers, the CiJ portal reported Bannatyne saying. A similar fate likely awaits a plot in the town of Września, near Poznan. For ProLogis, 2009 was a year with virtually no new development except three build-to-sell projects, he said. In 2010, it will focus on securing tenants for some 400,000 sq.m. of unleased space, and target BTS projects. It will also work to retain existing tenants and sell some of its land bank.

In Poland last year, ProLogis signed lease agree-ments for some 325,000 sq.m, of warehouse space including 153,000 sqm of new lease transactions, giving it a 34% market share. No new land acquisi-tions or speculative developments are planned, though Bannatyne said the market can change quick-ly. “The cycles on the Polish property market are so much faster,” he said. pie


Slovakian Immocap to invest €100m in BratislavaSlovakian developer and investor Immocap plans to invest €100m in a new multifunction complex, Cen-trál, on a 2 ha. Of a former spa site in the nation’s capital Bratislava.

The complex will have a shopping mall, housing, two multi-purpose buildings and a 98m high-rise building and will include a 1ha town park. Plan-ning permission has been received and preparatory work for starting construction is under way. The complex is scheduled to open in autumn 2012. Im-mocap was set up in 1996 in Bratislava and later expanded investment activities to Hungary. It has implemented transactions with international prop-erty companies including Heitman, BSR Europe and GE Capital. pie

Budapest office to stay slow, industrial to stabilise While the latter half of last year was difficult for the Hungarian office market, with rents sliding by 10%-30% over the year, Colliers International sees low market activity continuing with perhaps slight growth in the second half of the current year.

Colliers’ Director Miklós Saly said the supply of office stock and the vacancy rate increased last year, while take-up fell off and net absorption turned neg-ative. “In light of this we can continue to expect mea-gre market activity, although we expect slight growth in the second half of 2010,” he said. Even though

current market conditions are favourable for tenants, occupancy did not pick up in 2009. A further 175,380 sq,m, of office is forecast for completion in 2010, and Colliers does not expect a significant in-crease in lettings though there may be some upturn in 2H09. Over the short term, its believes new shared service centres entering Budapest will have the great-est positive impact on the absorption rate, with con-tinuing interest in Hungary for outsourcing.

For Budapest industrial property, the market could stabilise this year after activity dropped sharply in 2008. “2010 could be the year of stabilisation if the market moves towards balance,” predicts Colliers’ Tamás Beck. Big-box logistics transactions accounted for 113,000 sq.m. of leased space, and city logistics and small unit transactions for 26,000 sq.m. pie

Sofia office should stabilise, rents rise – Elta Demand for office space in the Bulgarian capital of Sofia picked up towards end-2009 and Bulgarian re-altor Elta Consult expects rents to remain stable this year, spurring the market into gradual recovery. How-ever, other studies predict further price falls in office and industrial property.

By year-end 2009, rents were 22.5% lower than summer 2008 peak and this more realistic pricing brought renewed interest, Elta said. In 4Q09, take-up of available office space increased by 50% from the first nine months, but was still nearly 50% be-low 4Q08. Some 70,000 sq.m. of office space was completed in 2009, bringing the total to about 1.17m sq.m. pieC M Y CM MY CY CMY K

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CarrEFoUr to opEN largESt BUlgarIaN Mall

The biggest shopping mall in Bulgaria is due to open in spring. Developed by French

retailer Carrefour, it offers 66,000 sq.m. of space in the capital Sofia on Tzarigradsko

Shousse (pictured), Bulgaria’s busiest road artery. Name and the logo will be announced

in mid-March. Assos Capital is the investor and the architect is Ilian Iliev. The mall, 5km

from the city centre and 6km from the airport, is surrounded by 150,000 sq. m. of Class-

A office buildings and offers parking for 2,800 cars.

rUSSIa / CIS

Moscow office seen sup-ported in 2010 by economyIn January the total amount of new quality office stock coming onto the Moscow market was about 90,000 sq.m. most of it class-A buildings, reports Cushman & Wakefield. Even if lettings were around 25,000 sq.m., the low level is a traditional feature at the start of the year and the sector should be support-ed over 2010 by a positive economic environment.

“In 2010 everybody is waiting for good news such as new projects, increases in employment and in-creases in market activity,” said Lada Belaychuk, Deputy Head of Research at C&W in Moscow. “However, the real estate market typically lags the re-covery. The world economy has been showing posi-tive trends for the past half a year but at the same time sale prices and rental rates in the real estate mar-ket have only just stopped falling. The real estate market has already got over its worst period and the situation appears to have stabilised.” pie

Some signs of stabilisa-tion in Moscow office The Moscow office market functioned in a rapidly declining environment last year that contrasted sharply with pre-crisis growth years, and a combina-tion of sharply falling demand and near record sup-ply resulted in a dramatic rise in vacancy rates to a record 20% in mid-2009 for Class A and B sectors combined, according to CBRE.

Though some stabilisation set in during the second half, it did not prevent a fall in rental rates of 50%

from the peaks of 2Q08. The market has thus be-come strongly favourable to tenants, with incentives being offered by landlords that would not have been thinkable in early 2008

By end-2009, Moscow office stock reached almost 11m sq.m. While in 2008 about 204,000 sq. m. of class A properties was delivered to the market, 11% of total, last year this soard to 363,000 sq.m. or 23%. The vol-ume of letting transactions in Moscow last year reached almost 1.4m sq.m. – a 23% drop from 2008. pie

More Moscow warehouse delivered than expectedTotal stock of quality warehouse premises in the Moscow region is slightly over 3.2m sq.m. following delivery of new stock last year of 746,000 sq. m., more than expected at the beginning of the year, ac-cording to CB Richard Ellis.

It said that in 2009 however the era of huge specu-lative warehouse development came to an end and many projects were put on hold - even while several international quality projects were delivered to mar-ket. The future pipeline, limited though it is, remains very uncertain. CBRE experts expect that 250,000–300,000 sq.m. of new inventory to be delivered this year. The vacancy rate in the asset class in Moscow skyrocketed to 15.6% in mid-2009 from 3.5% at the end of 2008. CBRE expects it to stabilise in this year and slowly start to fall from 2H10. pie

Russian property invest-ment may have hit bottomTotal property investments into Russia last year reached €790m – 77% down from 2008, according to international realtor CB Richard Ellis. However, the firm forecasts that the bottom of the market has been reached, and stabilisation and a gradual recov-ery should follow this year.

It said in a report that 2006 to 2008 were boom years for Russian real estate investment, with volumes rising beyond €2.5bn in each of those years and over €3.4bn in 2008. Last year however saw just 22 invest-ment deals across the entire nation – with average deal size of €49m - compared with 50 in 2008 and 25 in 2007. This compares with an average size of €71m in 2008 and €110m in 2007. The largest deal of the year was the sale of five office properties in Moscow by Russian developer Horus Capital to Russian banking group BinBank for an estimated €214m. Ph

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Foreign buyers also stayed away last year in droves. Just six deals involved non-Russian buyers, with three deals falling in the final quarter. The nationalities in-volved were UK, Sweden, Norway, US, and an inter-national consortium based in the British Virgin Is-lands. Nevertheless, this foreign investment accounted

for 44% of the total. The majority of vendors were Russian developers and other property companies, ac-counting for 72% of sales. CBRE says the wider inter-national investment community will need to see evi-dence of domestic confidence before committing to a market that they still regard as high risk. pie


‘Discovery’ of Poland’s real estate sector now over 20 years in the pastBy Andreas Schiller, pIE Editor-in-Chief, Russia/CIS-CEE


perhaps because for some editors only

bad news are good news there was not a

lot of ink expended over Poland in re-

cent months; the nation simply did not have

much bad news to report! Although it obviously

could not completely avoid the worldwide crisis,

Poland was and is the sole country which found

a good way through (See pp 66-67). But looking

at the present means looking for only a short

span of time - and as real estate investment

means long periods of time, this year’s Guest of

Honour at MIPIM is definitely worth another

check. International investments started to pick

up in Poland somewhere around 2000. Around

the turn of the millennium came purchases from

German real estate investor Deutsche Grundbe-

sitz, at that time a subsidiary of Deutsche Bank

and forerunner to today’s RREEF. It bought the

shopping malls Galleria Dominikanska in Wro-

claw and Galleria Lodzka in Lodz, both devel-

oped by Hamburg’s ECE. In the following years

Holland’s ING started becoming active, develop-

ing the large mixed-use scheme Zlote Tarasy di-

rectly at Warsaw central railway station. Nearby,

Hochtief Development pushed the construction

of skyscraper Rondo 1, opened in 2006. In the

same year Degi – then an Allianz unit, now be-

longing to Aberdeen - purchased the office

building The Metropolitan in Warsaw. And so

things have progressed.

But not many people know that the first inter-

national investment in Poland dates back to 1986

when the nation was still under communist gov-

ernance - and internationally insolvent. Austrian

pioneer Franz Jurkowitsch with his Warimpex

company arranged investment and started con-

struction of the hotel Holiday Inn, at that time

operated by Polish state tourist group Orbis, later

followed by office building Warsaw Towers, which

was sold to Europolis. The Holiday Inn took place

as 100% foreign direct investment, which Poland

was the first communist state to permit. Soon,

other international developers and investors fol-

lowed. First mover Jurkowitsch was deeply in-

volved in the process, preparing not only this

construction but alterations in the legal frame-

work together with Polish politicians and bank-

ers. Both Warimpex and Europolis are not only

still active, but have expanded Polish exposure.

Adding investments as well as developments still

in planning, Warimpex has 17 projects in its Polish

track record – among them the MIPIM-nominated

andel’s Hotel in Lodz, while Europolis has around

eight, including Warsaw Towers. ECE has pro-

gressed from its first two shopping centres to five

Galleria cities in Poland, with Gdansk, Krakow,

and – in the pipeline – Szczecin. And although it

became pretty quiet around RREEF, other German

funds have played the Poland card. Among these

are Degi, Deka, Union Investment and SEB.

In general, it is certain that more purchases

will occur by international investors this year,

perhaps outstripping even 2009. Austria’s Im-

moEast is already checking. “Poland is a core

market for ImmoEast. We aim to grow our Polish

portfolio especially in the retail segment,” says

Board Member Manfred Wiltschnigg. “In office

ImmoEast is under-represented in Poland, but

we see Warsaw as one of the most promising of-

fice markets in CEE/SEE. Secondary cities are be-

ing selectively analysed for potential supple-

mentary additions to our portfolio.” In the

long-term this would fit with Ghelamco’s MD Po-

land Jeroen van der Toolen, who adds: “I expect

that by the end of 2010 vacancies in Poland will

reach about 5% and in 2011 we will notice seri-

ous rent growth resulting from the shortage of

good quality office space in and outside the city

centre.” UBM’s Poleczki Park is situated close to

the airport, but that company is busy planning

not only Phase II, its CEO Karl Bier refers to retail

warehouses and/or retail centres as well. “Beside

office, this segment is very interesting since

there is always demand for goods you use day to

day. Retail warehouses seem to me a risk-averse

alternative. They can work in secondary cities or

at least in all cities with a population around

100,000 to 200,000 and a good catchment area.”

ECE says Poland has now become its second

most important market after Germany. And

what about the banker’s view? Marek Koziarek,

Managing Director of Commercial Real Estate at

Poland’s Bank Pekao, summarises: “Poland will

benefit more than other countries from recov-

ery, having good fundamentals.” And this is not

the only good news. Koziarek points to another

important fact as well: “Also EU funds for infra-

structure investments as well as preparations for

UEFA European Football Championship Euro

2012 will help to boost the economy.” as

Andreas Schiller can be reached at

[email protected]

Russian commercial property values have likely hit bottom and the road to recovery has already started, says CB Richard Ellis.

rUSSIa / CIS

Spb wins Khrushchyovki housing in petersburgThe private Russian housing developer SPb has won a tender from the City adminsitration to redevelop 22 residential areas in different districts of Saint Pe-tersburg, after submitting a bid of RUB392m (€9m) for nearly 900ha of land divided into four lots.

In a project costed at total investment of RUB1bn (€23m), SPb plans to construct modern residential buildings in the quarters, to replace the so-called Khrushchyovki, five-storey houses of the ‘60s and ‘70s, nicknamed after then-Soviet party leader Nikita Krushchev. Some 35% of the total 7.2m sq. m. will be provided to the city for the relocation of present residents.

Through Cyprus firm Via Rentasel, SPb is control-led by Artur Markaryan, former MD of construction group GlavStroy, Maksim Vorobyov, owner of fish processing company Russkoye More, and Aleksandr Abramov, co-owner of steel group EvrAz. The city administration has given the investors until the end of this year to finish planning, and say they must start building during 2011. Completion of the redevelop-ment project is expected in nine years. pie

Sweden’s Oriflame takes Novosibirsk logistics spaceSwedish cosmetics company Oriflame has signed to lease warehouse premises in the Class A logistics park in Novosibirsk, western Siberia, with investor and owner Raven Russia. The latter has invested $1.5bn in the development of Class-A warehouses across Russia and CIS countries comprising over 1m sq.m.

The lease period for the Oriflame agreement is five years, and the rented space, including office premises amount to 5,000 sq.m. Oriflame had already rented warehouse premises of Class B in Novosibirsk, but decided to move. Logistics park Novosibirsk is located on 18ha land plot in the Kirovsky district in the south of the city, close to road M51 connecting with Mos-cow. The total area of the logistics park is 117,000 sq.m., including 100,500 sq. m. of warehouse space, 9,800 sq. m. of mezzanine area, and 6,500 sq. m. of office. It opened in February last year. pie

EBRD in €34m finance for Russian regional hotelsThe European Bank for Reconstruction of Develop-ment is to fund construction and operation of five mid-market hotels in the Russian cities of Samara, Krasnoyarsk, Kaliningrad and Yaroslavl, providing a €27m senior loan and equity investment of €6.6.m.

The hotels, bringing a total of 897rooms to the cit-ies, are estimated to cost around €98.5m in total to build. The developer is Russian Hotel Investment, incorporated in The Netherlands and owned by Ak-fen Holding Anonim Sirketi and the principals of the Kayi and Insa firms based in Turkey. They will be managed by French operator Accor under Ibis and Novotel brands.

“At present, there are very few international hotel groups operating in Russia, and where they do exist they are predominantly in the four-five star segments in Moscow and Saint Petersburg,” EBRD said. Most regional Russian cities have no internationally brand-ed hotels and especially no mid-range hotels, and it expects the financing to have a two-fold and strong demonstration effect. “Observing a successful hotel project will lead .. other international hotel operators to consider expanding operations into the largely un-touched Russian provincial cities and .. also encour-age commercial banks and equity investors to look at similar projects.” pie Ph

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Barcelona office lettings growing; 4Q09 doublesBarcelona’s office market will see further growth in lettings activity in 2010 following take-up in 4Q09 at double the previous quarter. A report by realtor Savills says that large occupiers such as AXA and Cofely have paved the way for further activity, while a drastic reduction in office supply should see con-solidation of rents in the latter part of 2010.

Of the 500,000-sq.m. anticipated pipeline for 2010, only 236,000 sq.m. will be realised, of which 36% is pre-let. This development correction will pre-vent significant rises in the vacancy rate of 10.2%, a level that has not been recorded since 1996. Follow-ing handover of new developments in mid 2010, of-fice rents, which have been falling for six consecutive quarters and stand at €20 per sq.m./month, will sta-bilise as the market absorbs stock that will not grow in a significant form until at least 2012. Eusebi Carles, head of Savills Barcelona, commented: “The year 2009 has been dominated by unheard of levels of economic uncertainty, a factor which without doubt has influenced many business decisions in the real estate market. 2010 should bring greater levels of certainty, which in turn should contribute to im-proved performance of markets in all facets.” pie

PIE COMMENT: If Spanish activity is picking up, also outside the main office location of Madrid, this is a strong sign that recovery is on track throughout western Europe. Most specialists see the nation’s deep economic problems, in particular residential overbuilding last dec-ade, as taking some time longer to be durably overcome. Spanish banks are expected to exit a number of property portfolios this year.

Estonia to lead Baltics from recession – Ober-HausOffice vacancies now exceed 25% in the Baltic states, with rents continuing to fall on double-digit eco-nomic contraction, but Estonia is best placed to sta-bilise, says realtor Ober-Haus. In the region’s devas-tated housing market, weakness will likely persist in the first half but price and supply drops could pro-duce stable or slightly higher prices in 2H10.

All three countries saw a drastic drop in new de-velopments. But investment is expected to resume this year - from virtually zero in 2009 - at no higher than 10% yield as the region’s slide is bottoming out, economic recovery beginning and devaluation risk

receding. Of the three Baltic nations, Estonia pros-pects of joining the euro are improving and it is best-placed, with GDP down 14% in 2009 but seen ex-panding 1% this year. New office space was less than one-third of 2008 at 30,000 sq.m. and no new office projects are slated for 2010.

Latvian GDP shrank by 18% in 2009 and unem-ployment rose to 17%. A 4% GDP contraction is seen this year. Office space delivered in Riga rose 10%, and despite many suspended projects, far outpaced de-mand, driving the vacancy rate up to 30%. Ober-Haus expects a stabilising economy and lack of new supply to improve occupancy. Lithuania’s GDP contracted 16% last year, with another 2% seen this year. Office rents dropped 40% in capital Vilnius and nearly 50% percent in Kaunas and Klaipeda. Shopping mall va-cancies also rose to 5.7% in the city from 2.5% last year. Retail volumes fell 28% in Latvia in 2009, but slightly less in Estonia and Lithuania. pie

German office values turn higher – JLL’s VICTOR Jones Lang LaSalle’s VICTOR valuation index of prime office property in the Big Five German cities rose by 1.8% in the fourth quarter against 3Q09, re-ducing the 12-month value slide to 1.4% from near-ly 13% in 2008. For the first time since the start of the downturn, all five conurbations had positive val-ue growth.

The prime office locations have entered a phase of stabilisation, JLL said, and a comprehensive value re-covery is now mainly dependent on a cyclical stabili-sation of rents. “The positive valuation progress in fourth quarter resulted mainly from the slight change in trend in yields,” commented Andrew Groom, head of JLL valuation advisory. “This mainly impacted prime markets, whose stability in a difficult year and alongside an inflationary danger .. motivated equity capital players such as open funds, insurances and pension funds to go shopping. The quite strong in-vestment pressure from this angle met a continuing shortage on the supply side in core product. In addi-tion, property currently offers a strong investment asset profile in comparison to other options such as equities and government bonds.”

The full year valuation downturn contrasted sharp-ly with the dramatic 12.6% slide in 2008, and the continuation of declines in the first half of last year. Patrick Metzger, head of JLL Frankfurt valuation ad-visory, noted VICTOR has high correlation with similar European indices, showing that markets are mainly influenced by global economic factors. Added Ph

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EBRD is providing nearly €34m of loans to support hotel construction in some outlying cities in Russia.

Coinciding with Vancou-ver’s winter Olympics,

JLL’s VICTOR finds Ger-man prime office values

have turned higher for the first time since 2007.

rEportS / StUDIES

Groom: “Even if valuations have now swung into a positive trend, the financial crisis is not yet complete-ly behind us.” pie (Story first published in PIE 153 on 15February)

Romanian office, retail pipeline to remain limited The office projects pipeline Bucharest is only 280,000 sq.m. for this year and 100,000 sq.m. for 2011, says a recent Jones Lang LaSalle report. Last year, modern office space in Bucharest reached 1.5m sq.m.. with 125,000 sq.m. delivered in 4Q09. Pre-leases have dried up, now at 30% compared with70% a year ear-lier. Colliers saw rents in Bucharest down 20% last year, and sliding another 10%-15% this year.

Retail supply in Bucharest reached 500,000 sq.m. last year, with total Romanian retail stock rising to 1.3m sq.m., JLL reports. Rents fell, with prime shop-ping-centre rents at €70-85/sq.m./month. Five new retail projects and two extensions with total GLA of 240,000 sq.m. are opening this year nationwide, 90,000 sq.m. in Bucharest from the opening of Sun Plaza and Cocor. After those, JLL expect no major schemes in Bucharest in the short term, as the develop-ment pipeline has essentially been shut off or delayed.

In residential, the number of homes completed in Bucharest actually rose by 16% to 1,520 units up to end-September but around 15% of all development from 2008 were put on hold or shelved. Despite a 15% fall in asking prices, JLL expects mortgage re-strictions to keep the pace of sales low. It sees no im-provement in housing demand until 2011. DTZ Echinox is predicting a 43% plunge delivered homes

this year in 2010. Meanwhile, a Ziarul Financiar sur-vey found that Spanish, Israeli and Greek investors bought up plots totalling over 100 ha in Bucharest in the past three years. pie

New offices have lower costs despite higher rents A new indicator developed by France’s ESSEC Busi-ness School and BNP Paribas Real Estate shows busi-nesses’ property costs can be lower in new buildings than in older offices.

Although rents are higher in new buildings, the to-tal property cost per employee can be lower because of greater flexibility in the use of space. The ESSEC/BNP Paribas indicator suggests the 2008 real estate cost per employee for financial sector companies in central Paris was €14,193 per sq.m. in new office blocks but €15,767 in older buildings. In La Defense an older building cost €11,009 per sq.m. compared with €10,450 for new office space.

The model also suggests that the cost per financial sector employee in an older building in central Paris will decline to €13,629 per sq.m. in 2011 from €15,767 in 2008, partly as a result of the 5.2% gen-eral decline in rents forecast by BNP Paribas RE for existing property in the central business district over the period. The indicator on property costs per em-ployee has been developed as part of BNP Paribas’ funding of the ESSEC’s Real Estate Chair, which is currently held by Ingrid Nappi-Choulet. pie (Story first published in PIE 152 on 8 February)

Core CEE office yields to fall, investment risingOffice yields in central and eastern Europe could fall this year, especially in core markets, due to increasing demand for top properties and limited supply, says broker CB Richard Ellis. Yields for non-prime and secondary locations remain unclear, but weighted av-erage prime office yield - including Russia and Ukraine - in 2H09 stopped rising at 10.1%.

More deals closed near quoted prime yield levels, indicating that office investment activity will increase further in 2010, it said in a report. Prime office is the focus for many investors, notably German open-end-ed funds. Office investment picked up significantly in 2H09 to almost €900m, bringing the 2009 total to €1.1bn. In addition, investors that stayed out of CEE in 2009 are showing renewed interest. Among


these are groups from Austria, UK and the US, Mid-dle East, and some new investors from Asia.

CEE markets should turn more owner-friendly be-cause vacancy rates in city centres, and confirmed pipelines are less than 8% of current stock. Other CEE markets will remain occupier-friendly, and strong development will continue in SEE. Bucharest, Sofia and Belgrade, with vacancy rates above 16%, will see substantial amounts of new space in 2010, often postponed from 2008 or 2009. Moscow’s ac-tive, large-tenant-oriented development market with its high vacancy rate will likely remain occupier-friendly for now. pie

European property investment boosted by both size, volumeGrowth in European commercial real estate invest-ment is being driven both by an increase in deal size and a sharp rise in transaction volumes, according to CB Richard Ellis. The number of deals completed in fourth quarter rose 67% from the bottom of the mar-ket in 1Q09, and some properties bought then have already been re-traded at a substantial profit.

While eight transactions larger than €200m were concluded in the first half for a total €3.5bn, the second half saw 24 deals over €200m valued at over €9bn. While the average size of the deals in the first quarter ws just €16m, the combination of the re-covery in values and the ability of investors to com-plete larger transactions drove this up to €23m by end-year.

“Particularly notable has been the growth in activ-ity at the very top of the market,” the report said. “However, despite this recent recovery, large transac-tions remain much rarer than they were at the peak of the market in 3Q07, when the average deal size was €49m and that quarter alone saw 62 transactions for more than €200m.” pie (Story first published in PIE 153 on 15 February)

paris market set for slow recovery in 2010 – KeopsThe Paris property market is likely to experience a slug-gish recovery in 2010 after the downturn of 2009, ac-cording to a survey by real estate consultancy Keops.

Keops surveyed around 1,000 property specialists and around half of respondents predicted a slow re-covery for Paris. Some 30% said they expect 2010 to be similar to 2009 and 13% even predicted a further deterioration this year. Investment is forecast to pick up, with 51% seeing €10bn-€12bn this year, against 2009’s €9bn. A further 18% foresee €12bn-€15bn and 4% think investment will exceed €15bn. “Deals already under way ... permit us to think that invest-ments could reach €12bn-€13bn,” said Keops CEO Laurent Castellani.

Respondents expect little variation in central Paris office yields over the next 12 months, with 36% fore-casting a falls of less than 50bp, 32% no change and 13% a rise of less than 50bp. “This result is surprising because yields have already started to decline. We see no reason why they should go back up again,” said Keops deputy managing director Alain Roy. Property specialists expect little improvement in investment

tHE MISSIoN: Bringing transparency to mainland Europe real estate with information, analysis and commentary for US and global investors- the sharp end of capital flows. tHE platForM: 4,000-5,000 targeted print per month; 7,000-9,000 MIPIM /Expo Real/key trade fairs. 51, 000 investor database. Weekly intelligence-analysis. Daily updates. iTunes Podcasts. Property Breakfast seminar series. Experienced editors.

propErty INvEStor EUropE Join the professionals

Source: CB Richard Ellis.

European commercial real estate turnover, 2009

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rEportS / StUDIES

volumes in Paris Ile-de-France after deals declined to 1.8m sq.m. in 2009 from 2.4m sq.m. the year before. Keops itself sees transactions exceeding 1.8m sq.m. and possibly getting close to 2m. pie (Story first published in PIE 152 on 8 February)

German hotel invest-ment slides; upturn seenGerman hotel investment activity accelerated in the second half of last year, with nine transactions for €248m, furnishing hope of a sustainable recovery fol-lowing a volume of a mere €90m in only four trans-actions in 1H09, says Jones Lang LaSalle.

“Even if the mood in the investment markets brightened a bit during the year, larger financing con-tinued to be hard or impossible to do,” said Ursula Kriegl, of Jones Lang LaSalle Hotels Germany. Invest-ment will not change fundamentally in 2010 due to the tense economic situation, but she is expecting, “increasingly dynamic events in the hotel investment market, continuing the development of the 2H09.”

Activity by foreign investors in 2009 fell, after they had dominated hotel investment from 2004 to 2008. While in 2008 foreign buyers were behind 64% of hotel investment volume, in 2009 this was only around 21%. The 2008 trend toward smaller transac-tions also continued last year, with the average pur-chase price hovering around €26m. Only one of the 13 hotel transactions exceeded €50m. pie

Belgian property invest-ment surges in 4Q09Belgian real estate investment surged to €431m in the fourth quarter, a 205% increase from 3Q09, with up to five buyers for every asset compared with just one at the end of 2008, according to international property advisor Savills.

Sheelam Chadha, head of research for Savills Belux said: “Funds which missed their chances in 2009 will need to be quick as competition for the few prime assets is becoming more apparent.” The surge in de-mand has driven yields on nine-year leases down to around 5.8% from 6% in 3Q09. Investment in Brus-sels jumped 391% in 2H09 as international invest-ment funds looked for prime product, but was still down 71% for the year as a whole at €363m. This reflected a lack of long-let product and unwillingness of owners to sell at above average yields. Yields on leases of between three and six years have stagnated at

6.5%-6.75%. Savills said investors perceive these as-sets to be more risky due to a continuing lack of con-fidence in the short-term rental markets. pie (Story first published in PIE 154 on 22 February)

European property sentiment cautiously optimistic – pwC’s ForbesReal estate sentiment looking into 2010 is cautiously optimistic tempered by two elements - the state of European economies and the potential impact of governments reining in support programs such as the UK’s quantitative easing and Germany’s short-time work subsidies, says PricewaterhouseCooper’s Euro-pean real estate head John Forbes.

He told the Urban Land Institute’s European con-ference in early February that the 7th combined 2010 Emerging Trends survey of European real estate is headlined with the quote “Expect a long slow haul”. This followed the 2007 survey which had been sub-titled “We are at five minutes to 12”, and the 2008 report at the start of the liquidity crisis quoting “Fear is Back”, prior to the collapse of Lehman Brothers in the autumn of that year. The 2009 motto summing up the survey was “The going gets tough”.

“Actually looking back at 2009, perhaps things weren’t quite as tough from the occupiers’side as people expected them to be,” Forbes said. “In contrast to when we were constructing last year’s report, there is more of a note of cautious optimism this year. But that is tem-pered by two very significant buts: the economy and concerns about the short-term prognosis and the medi-um-term impact on economies as governments turn off the tap and reduce the medium term quantitative eas-ing in the UK, and short time working in Germany.”

He added: “The other big concern is a problem coming up in 2013/4 in the debt that needs to be refinanced, both bank debt and the looming bubble of CMBS. Respondents look at that as both a threat and an opportunity, depending on where you are.” But the most consistent sentiment this year is that despite the gloomy backdrop of economy and real estate, the green agenda and sustainability are still high on the priority lists and are actually rising.

New debt will be in relatively short supply and is going to be strictly rationed, which means that invest-ments that take place will be relatively low geared. “There’s a great deal of money and it’s much more con-fident, looking for a home. But debt will be rationed for a long time and the price will be high,” Forbes said. pie (Story first published in PIE 152 on 8 February) Ph

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pEoplE


ING Real Estate Investment Management CEO GEORGE JAUT-zE retired at the start of this month after a career of almost 20 years in the real estate business at ING. WILLIAM CONNELLy will take over in addition to current responsibilities as head of Banking Services within ING Commercial Banking. The group said the agreement reached with the European Commission in October means the most important priority at this time is to disentangle Banking and Insurance and execute the separation in a way that maximises value for all stakeholders… KATAy-OUNE pANAHI has been appointed managing director of De-facto a unit of Paris La Défense management EPAD (Etablisse-ment Public de Gestion du quartier d’affaires de La Défense), effective this month. Panahi has been adviser in the office of former EPAD MD pATRICK DEVEDIAN, now minister in charge of recovery planning... The German federal investment funds association BVI has named Deka Investment Executive Chair-man THOMAS NEISSE as new president… JOACQUIN RIVE-RO has stepped down as chairman of French REIT Gecina, after relinquishing his role as CEO in November. New chairman is BERNARD MICHEL, also chair of Gecina’s largest shareholder Predica… CB Richard Ellis Investors has name three new leader-ship nominations for continental Europe. Effective immediate-ly, pETER DICORpO, Global COO of CBRE Investors, is appoint-ed Head of CBRE Investors. MD CHRISTINE SONNIER is promoted to Directeur Général for continental Europe, as is JéRôME CASTELNAU. THIBAULT DE VALENCE has left the company to pursue new entrepreneurial opportunities… In Frankfurt Degi CEO BäRBEL SCHOMBERG and board mem-ber MALCOLM MORGAN have resigned from the company… In Austria, MARKUS STEINBöCK has taken over the depart-ment for residential buy-to-let investments. He moves over from a post as Editor in Chief of the business magazine Gewinn… The supervisory board of DekaBank fund manager WestInvest has appointed MARK WOLTER as new MD of the group fund management company. He moves over from Schro-der Property in Germany, and joins in the executive board TORSTEN KNApMEyER, BURKHARD DALLOSCH and STE-FAN BORGELT… AMIR BERNSTEIN has left the Israeli-based group Gazit Globe to open a new real estate platform Bven-tures. Operating from Zürich, the firm’s focus is investing in re-tail and offices in German-speaking countries and the Nord-ics… CB Richard Ellis has strengthened its Global Corporate Services team in the Europe, Middle East and Africa region with the appointment of Senior Directors pAUL COpELAND and RALpH HOLLAND. Copeland joins from Barclays Capital while Holland, who joins the GCS team in Rome, was formerly MD at Cushman & Wakefield in Italy. They report to MATT pULLEN, EMEA Head of Global Corporate Services… International prop-erty fund manager Cordea Savills has appointed CHARLES SMITH as Associate Director in its institutional business team, based in Munich. Moving over from Jones Lang LaSalle, he re-ports to MICHAEL FLyNN… At Eurohypo in Frankfurt, STépHANE R. ADOLF has been named new Head of the Com-mercial Real Estate Banking Continental Europe division. He succeeds HARTWIG GLATzKI who will take early retirement after 28 years of employment. Adolf, a French national, moves over internally from the bank’s Credit Risk Management Europe

division… In Paris, THIBAULT DE VALENCE and FRANçOIS LEX have left CBRE Investors and launched an investment man-agement firm focused on Paris, Brussels and Milan markets… ING REIM has appointed GIJS KLOMp head of Asset Manage-ment Hungary & Romania, adding Hungary to his brief where he takes over from pETR HORVARTH who has left following the decision to combine both countries into one management centre... In Romania, Jones Lang LaSalle has appointed TROy JAVAHER new country manager, following the appointment of interim country manager THIERRy DELVAUX as managing di-rector of the international desk, and named FEREC FURULyAS country manager in Hungary... EDGAR ROSENMAyR, who has been a board member of Vienna-based Immoeast since January 2008, is to leave the board on 30 April. The move follows share-holder approval to merge with majority shareholder Immofi-nanz… CEE shopping centre investor and developer Atrium European Real Estate has appointed THOMAS SCHOUTENS as Chief Development Officer. Schoutens, a Belgian national, moves over from the French Carrefour group… the German Sustainable Building Council DGNB has named pHILIpp KAUFMANN to head up its international expansion. As well CHRISTINE LEMAITRE, deputy MD, takes over as MD from CHRISTIAN DONATH who is leaving the company for personal reasons. JOHANNES KREISSIG will be deputy MD provisional-ly, until a replacement is found… In France, RéMy GANCEL has been appointed senior advisor at GE Capital Real Estate for the hotel joint venture Capital France Hotel created together with Cardif and Algonquin. He moves over from the REIT Sophia… Develica Deutschland, the AIM listed German property investor has appointed LARS LUECKING as MD with effect from 1 Feb-ruary. He joins from Citi Global Markets and formerly Hypo Real Estate… MALTE MAURER has taken over in Jones Lang LaSalle Deutschland as National Director of Residential Investment. He moves over from Deutsche Wohnen, he reports to JLL CEO AN-DREAS QUINT… Cushman & Wakefield has named GLENN RUFRANO President and Chief Executive Officer of the group, based in New York. He moves over from Australian-based Cen-tro Properties… Moscow based developer Central Properties announces changes in top management: CEO DENIS STEpANOV has been named president, SERGEy EGOROV has been promoted to CEO, Commercial Director DMITRy KIRI-TOpULO becomes First Deputy CEO… International real estate adviser Savills named ULF NILSSON as CEO of its Swedish busi-ness, an internal promotion… AXA Investment Managers has named DANIELA HAMANN Communications Manager, taking over from BARBARA TWIETMEyER who is on maternity leave… In Denmark, JøRGEN JUNKER who turns 65 in Sep-tember will step down as of 1 October as COO in Sjælsø Grup-pen… DOMINIQUE SCHLISSINGER, chairman of Silic, has reached retirement age and has been replaced by FRANçOIS NETTER, effective 10 February. pHILIppE LEMOINE is named CEO… ANTOINE MERCIER has been named associate of the Paris property group of the international law firm Salans… DAVID CLIFFORD has joined Viveris Reim as investment direc-tor, bringing 10 years of experience in firms such as Hammerson and Lone Star… GéRARD HéNO has been named MD of the group Léonard de Vinci, chaired by ELy MICHEL RUIMy. pie

pIE people

Christine Lemaitre

Christine Sonnier

Markus Steinböck

Peter DiCorpo

German hotel investment slid last year but picked up in the second half, boosting hopes of a revival.

ForWarD tHINkINg


the merry month of MIPIM again and thank God that we

are all allowed to creep out from our dark wintry caves

and bash a few bottles of bubbly over the head in the

fresh sunny sea air of Cannes. Ahhhh! Well, let’s hope the sun

shines; always has so far, but this is only my fifth. Many, includ-

ing PIE Editor-in-Chief Russia/CIS-CEE Andreas Schiller, are mul-

tiple offenders, well into double figures. But I detect spring-like

signs of success in my long-time Yes We Can! campaign to con-

vince real estate markets in non-English-speaking Europe to

communicate and encourage inward investment. Certainly,

more and more property institutions around Europe realise

that PIE is interested in hearing their news and transporting it

to US and global investors - the sharp end, as I always maintain,

of capital flows. Question: Do you see your property institution

illuminated within the PIE 156 you are reading? No? You have

not yet identified the magic email address of news@pfeurope.

eu, mon brave! Note to PDA or PA: Do it today!

European real estate is in a state of transformation. The

shock of the crisis, the massive depreciations in portfolio val-

ues, the collapse in share prices, the cutbacks in personnel,

the draconian limits on credit lending – all this and more have

combined to make 2010-and-up a Brave New World. Large

companies are rapidly trimming their cloth to fit new param-

eters, shedding sectors, like Icade, and refocusing if needed.

Eurohypo, and other banks, are downsizing and re-focusing ..

and above all new companies, particularly investment man-

agers, are starting up, seeing opportunity in the shifts of the

sector’s tectonic plates. Look through this PIE 156 and you will

spot a new German REIT, plus news of other firms actually

looking at the stock market to raise capital. The stock market!

That old, wasted, useless platform where no one was pre-

pared to pay a decent price for a decent share in a decent

portfolio. Well, listed real estate is back. Now they are.

Two main themes reverberating around European real es-

tate were very much reflected at the Urban Land Institute Eu-

ropean conference in early February in Paris: 1. A mountain of

capital is building up in pension and insurance institutions

aimed at real estate looking for yield mainly in core, prime

commercial assets; and 2. despite huge amounts of public

capital support, banks will continue to shrink their balance

sheets. Despite this, major players at ULI were all breathing a

sigh of relief that already in the fourth quarter things were

looking up and that this process is continuing. The various

views included ECE’s Alexander Otto: “Europe’s economic re-

covery is under way but it will be sluggish and uneven. We are

looking at a crawl back up the hill, and how much values re-

cover will depend on where Europe ends up economically

against global competition.” Tour Eiffel’s Robert Waterland re-

mains concerned that bank credit still remains tough; even if

equity buyers among major institutions are back, will there be

enough prime product to go round? And what about second-

ary locations? Colonial CEO Pere Vinolas stressed that prime

office provides cash-flow, and only this counts in an environ-

ment where firms are under severe pressure on credit lines.

Senior Executive Ines Reimann was listening carefully to the

session on Grand Paris. “This is going to change how people

work,” she told me. The project, its shape, its timing and its

execution is vital to assessing investment in the French capi-

tal… so much so that JLL’s long-time French head Benoit du

Passage sees the area in the north of Paris, near the great sta-

tion of Lazare, as crucial for residential refurbishment.

My friend Dieter Wermuth, a senior economist now work-

ing with his son’s Wermuth Asset Management in Frankfurt,

has seen a few cycles come and go – having worked with Citi-

bank and Mitsubishi and, before that, Germany’s Five Wise

Men. Therefore, his clear-headed judgment on Russia, where

clear heads are not always in strong supply, is useful. So does

Dieter see a revival on the Volga? “Investing in Russia is fairly

risky, both in terms of market volatility and business environ-

ment but expected returns are correspondingly high,” he

writes in a recent study. But doing business is a challenge: cor-

ruption is endemic, the rule of law is not generally accepted -

including property rights - the political system is centralised

and autocratic, income distribution very uneven, business set

up is complicated… However, going forward, he sees no seri-

ous economic imbalances. “Commodity prices are at a com-

fortably high level after last year’s recovery but will not get

near the bubbly regions of spring and summer 2008; global

output gaps remain large and will thus prevent new excesses.”

One supporting factor is easier monetary policies. He sees

real GDP growing by 5% in 2010, followed by similar or higher

growth rates in later years. This will depend on reforms, in par-

ticular success in stimulating capital spending. “Russia is one

of the last frontiers, with an unusually good potential to suc-

ceed financially,” he writes. “The rising middle class has a

strong interest to secure property rights and the rule of law in

general, while the government is under pressure to get seri-

ous about improving the investment climate. Perhaps Russia

is next on property radar screens?

Allan Saunderson, [email protected]

Creeping out of dark caves of winter to bash a bottle of bubbly in Cannes sunshine

ForwArD thinkinG ❱❱〉

Allan Saunderson

Climb onto the PIE platform and speak to the world!Broadcast your advertising message to US and global real estate investors thru PIE distribution channels: Newsline, print, online, audio, Bloomberg, dailies, website

Hop onto the Monthly print Property Investor Europe, read by 15,000 readers worldwide

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Slip into a sponsorship slot on PIE’s highly successful

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Button into the www.pfeurope.eu

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Here are the people who can give you a hand up!

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thorstEn hErbErtTel. +49 170 4798793 [email protected]

Gaby WaGnErTel. +49 173 3177191 [email protected]

AarealMeet the prominent international experts covering all aspects of property finance and property management – up close, direct and personal, at MIPIM 2010. As one of the leading international property specialists – with a local presence in 19 countries on 3 continents – we look forward to wel coming you in Cannes.

Meet us at our booth (Espace Riviera/R29.07) and get a close-up view of Aareal Bank Group at work. Talk to our experts, find out about the latest market data and trends, and learn about the offers for state-of-the-art property management. Find out more about Aareal Bank Group and MIPIM 2010 at www.aareal-bank.com/mipim2010

Experience proximity in action:The world in Cannes – on 20,000 square metres. See you there!

MIPIM16-19 March

2010

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