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Institutional Real Estate Europe

March 1, 2011: Vol. 5, Number 3

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  • The Last Hurrah: Harsh Times Are Coming to Retail But Real Estate Investors Still See the Sector As a Safe Haven

    Retailers have never had it easy. They have to deal with fickle customers — where GP stands for general public and LP for limited pursestrings — obdurate suppliers, stock management, margins and profits. And landlords. As late December 2010 across Europe proved, they also have to handle disastrous weather situations, reduced footfall and ravaged sales plans.

  • Untying the Knots: The Forgiving of Debt in a Debt Overhang and Value Destruction Situation Can Be a Win-Win for All Participants

    The debt overhang is still persistent in many European commercial real estate markets and will be for some time to come. As explained below, debt overhang can give rise to several issues, not least in that it incentivises equity holders to pass up profitable projects, something that can be very detrimental to creditors. To maximise their own expected pay-off, it may make sense for creditors to write off some debt, changing the incentives of equity holders. I hope that the theoretical examples provided will spark an interest for the problem of debt overhang; learning more about the debt overhang problem could provide useful arguments in debt negotiations.

  • A Natural Hedge: Long-Term Investors Worried About Inflation Should Consider Property

    As the risks of financial meltdown and full-blown depression seem to have been averted, with most economies on the road to recovery, the consequences of the huge boost to the money supply are being considered, with an increasing number of investors now expressing concern about the likelihood of high inflation.

  • Financial Leverage and Risk: Property Level and Marketwide (Systemic) Perspectives

    The use of debt in real estate investment is widespread, and there is good reason for this. Real estate assets are big-ticket, lumpy and capital intensive, and hence many investors require debt financing to get in the game, especially if they want to be able to acquire enough properties to gain meaningful diversification benefits. However, investors are also drawn to debt at times not because they need it but because they believe that it changes the nature of the return-risk structure of their equity investments in their favour. In this case, investors use fixed-cost mortgage debt financing in the hope of levering up or magnifying the returns to equity invested above those generated by the property (asset) based on total capital invested; debt is used to juice returns. The major debt overhang that the sector is dealing with today is a stark reminder that investors — and lenders — can take this too far, with disastrous ramifications.

  • Shop Talk: A Conversation With Kevin Turpin

    The countries of central and eastern Europe have come along apace since the heady days of the late 1980s, and were a magnet for international real estate investors in the 1990s and 2000s. Then came the 2008 financial crisis and the 2009 recession, and everything seemingly came to a halt. Senior editor Sheila Hopkins spoke recently with Kevin Turpin, a director and head of research for central and eastern Europe at Jones Lang LaSalle, based in Prague, about how the region has withstood the impact of the economic downturn, such that it is now expected to once again be at the forefront of international real estate investor activity during the 2010s.

  • Filling the Gap: Is Mezzanine Lending the Solution to the Funding Gap?

    With traditional channels for raising capital and debt severely constrained for the foreseeable future, opportunities for new investors to bridge this funding gap have been created. Mezzanine finance sits in the space between low-risk senior lending and full equity risk. Post–Lehman Bros, more than 100 mezzanine lenders have emerged across Europe. This group has been widely discussed as offering the “solution” to the funding gap — but can or will they be the answer to the real estate industry’s hunger for debt? Here I look at where they might be most active and why.

  • Aerium Sells French Portfolio

    Aerium has sold a 14-property mixed-use portfolio to Pegase Partners for €210.5 million.

  • APG Invests in Harmony China Real Estate Fund

    Netherlands-based pension asset manager APG has made a substantial, but unspecified, commitment to Harmony China Real Estate Fund, which is managed by COLI ICBCI China Investment Management Ltd. Harmony China currently holds interests in three projects in China located in Xi’an, Qing-dao and Shenyang.

  • British Land Buys UK Shopping Centre

    UK-REIT British Land has recently been involved in several significant UK transactions. The largest is the acquisition of Drake Circus, a 40,000-square-metre shopping centre in Ply-mouth, for £240 million (€282 million).

  • CBRE Investors Sells Asset in Paris

    CB Richard Ellis Investors, on behalf of its pan-European fund CB Richard Ellis Strategic Partners Europe Fund III, has sold a 30,300-square-metre office property in Paris to Opera Rendement, a SCPI managed by BNP Paribas Real Estate Investment Management.

  • Corestate Acquires German Mixed-Use Asset

    Switzerland-based Core-state Group has acquired the 14,000-square-metre Rund Carre, a mixed-use property in Hannover, from HSBC Trinkaus Real Estate GmbH for €25.5 million.

  • Deka Acquires Office Building in France

    Deka Immobilien GmbH has acquired an office building in Marseille, France, for €26 million. The 8,900-square-metre property, known as Le Patio, was sold by Custom House Capital, an Irish wealth management firm.

  • Euroffice Fund Achieves Investment Target

    AEW Europe’s Euroffice Fund has completed its investment programme with two recent acquisitions, achieving its investment target of €725 million.

  • German Retail Jumps to Top for 2011 Investors

    It’s that time again, when investors, fund of funds managers and fund managers are asked to make predictions on their allocations for the upcoming year. The latest annual Investment Intentions Survey from INREV, the European Association for Investors in Non-Listed Real Estate Vehicles, shows a general optimism that comes with a recovering economy.

  • Heitman Forms JV with TriGranit

    Heitman, on behalf of the Heitman European Property Partners IV fund (HEPP IV), has taken a 50 percent stake in the Arena Centar Shopping Centre in Zagreb, Croatia. The remaining 50 percent stake will be retained by Hungary-based TriGranit Development Corp, which developed the property.

  • Henderson Invests in Property Across Europe

    Henderson Global Investors has been an active property investor in recent months, with a number of transactions completed.

  • Invesco, Ciloger Buy German Retail Portfolio

    Invesco Real Estate and Ciloger have acquired a 10-property portfolio of new retail assets in western Germany for approximately €218 million.

  • Legal & General Buys UK Shopping Centre

    Legal & General Property has acquired a UK shopping centre for approximately £92 million (€108 million) on behalf of its UK Property Income Fund.

  • Mountgrange Buys UK Industrial Asset

    Mountgrange Investment Management LLP has acquired a UK industrial estate on behalf of the Mountgrange Real Estate Opportunity Fund, a £300 million (€352 million) fund targeting UK property.

  • Orchard Street Buys Retail Park in Wales

    Orchard Street Investment Management LLP has acquired a 6,500-square-metre shopping centre on behalf of its UK Special Situations Fund for £14 million (€16 million).

  • PensionDanmark Invests in Danish Retail

    PensionDanmark and ATP Ejendomme have acquired three retail properties across Denmark in a 50-50 partnership.

  • PRUPIM Buys UK Supermarkets

    PRUPIM, through the M&G Secured Property Income Fund, has acquired three Sainsbury’s superstores for £125 million in a sale-and-leaseback transaction.

  • Union Investment Sells London Office Property

    Hamburg-based Union Investment Real Estate GmbH has sold the Whitefriars office building in London to a special purpose vehicle of the Employees Provident Fund of Malaysia for £148 million (€174 million).

  • W P Carey Completes Sale-and-Leasebacks

    W P Carey & Co, on behalf of its nontraded REIT affiliate CPA: 17 – Global, has acquired six logistics properties in the Netherlands from C1000 BV for €127 million in a sale-and-leaseback transaction.