GERMANY – Austrian real estate firm CA Immobilien intends to launch a German real estate investment trust (G-REITs) by next spring that will have between €1.5bn and €2bn in assets.
In a statement, CA Immobilien said between 26% and 49% of its current German affiliate will be floated on the Frankfurt stock exchange to create its G-REIT, raising between €375m and €500m depending on the flotation.
Although CA Immobilien’s German unit currently has €800m worth of real estate, it plans to acquire another €1bn worth of new properties ahead of its transformation into a G-REIT.
Wolfhard Fromwald, board member at CA Immobilien, said the €1bn investment will be concentrated on commercial properties in west Germany, including office, retail and logistical buildings.
Moreover, two-thirds of the €1bn will go to German properties already standing while one-third will be invested in new developments.
Fromwald added CA Immobilien was already on the verge of acquiring €250m worth of property.
News of CA Immobilien’s G-REIT comes just a month after IVG, Germany’s biggest quoted real estate firm, said that it too would launch the vehicle next year.
Like other REITs around the world, G-REITs are listed firms that pay no corporate tax but instead pay out 90% of their earnings as dividends to shareholder which are then taxed.
Aside from CA Immobilien and IVG, few real estate firms have announced concrete plans to launch G-REITs, though some have signalled interest in the vehicle. Experts largely attribute their hesitation to overall market feeling toward real estate shares currently.
"My feeling is that the market for G-REITs has been somewhat overstated. One of the general problems is that currently, real estate shares are not that popular with investors," said Martin Lemke, managing director at Patrizia, a listed German property firm.
"This has to do with in part with expectations of a correction in overheated markets of the UK and France. Interest rates have also come up so that is working against real estate shares too," he added.
A new study from German Landesbank HSH Nordbank supports the scepticism about G-REITs, as market capitalisation for the vehicles has now been downgraded to between €15bn and €40bn by 2010 from between €30bn and €60bn previously.
