UK property fund manager Activum SG is seeing opportunities for attractive deals in Germany, while avoiding the increasingly popular British market, where it expects further price falls to come, its founder said yesterday.
Activum, which plans to spend about 400 million euros (US$574 million) in Europe in the next three years, is mainly focusing its efforts on Germany’s commercial property market, and is eyeing deals that give annual yields of as much as 10 percent.
“Germany is still one of the most attractive real estate markets in the world ... rents and values have been relatively stable,” Saul Goldstein, founder and managing partner of Jersey-based Activum said in a telephone interview.
“A lot of capital chased yields in Germany over the past four years using massive leverage, and a lot of these assets will be disgorged,” said Goldstein, who previously headed Europe real estate advisory at private equity firm Cerberus.
ACQUISITIONS
Activum, which is targeting to raise between 100 million euros and 150 million euros from US and European foundations and family offices for its first fund, made a first closing in August last year and so far has acquired two German commercial properties, he said.
The fund’s first purchase, in December, was an office and retail complex in Berlin whose owner had become insolvent, and in July, it bought a Frankfurt office building from a real estate subsidiary of troubled German lender WestLB.
“We love stressed and semi-distressed assets. When sellers recognize how much work it is to reposition an asset like that ... that gets reflected in the price,” said Goldstein, who declined to disclose financial details on the deals.
On Tuesday, German real estate fund manager Union Investment said it bought the Mercado shopping mall in Hamburg for 164 million euros in the country’s largest individual property deal so far this year.
Goldstein said the Activum fund was aiming to return between 1.5 to 2.5 times equity to its investors at the end of its seven-year fund life, and is avoiding Britain despite a sharp correction seen there over the past two years.
“I don’t think the UK has experienced the full range that it should ... to think that in a few years you’ll have a complete correction of the market is ridiculous,” he said.
LINGERING WEAKNESS
His views gelled with some experts who warn a sustained revival was still some way off because of lingering economic weakness in Britain, despite recent data which raised hopes of an imminent recovery in Britain’s battered property market.
“Another problem with the UK is there is a lot of capital chasing things now ... unlike in Germany where most of the funds that had bought with high leverage have pulled out. Now is the best time to be in a market like that,” Goldstein said.
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