UNITED STATES - The Deka Global investment fund is looking to invest in United States' core real estate, to the tune of $500m (€317.4bn) to $1bn.
Deka Global is a $3bn open-ended investment fund based in Germany and backed by German investors but its US activity is managed through real estate manager ING Clarion Partners.
It recently made its first investment in the United States in two years with the $83m acquisition of the BAC Colonnade office building in Coral Gables, Florida, according to Richard Pink, managing director for ING Clarion and portfolio manager for Deka Global.
"The investor base for this fund wants real estate that can produce good current income over a long investment period. This is what core real estate does."
That said, he knows that finding core deals will not be easy.
"Finding correctly priced core real estate will be difficult. There is not a lot of product on the market now with many sellers uncertain about where pricing should be," said Pink.
Deka Global needs to diversify its assets because the real estate market in Germany is not large enough to satisfy its appetite for deals.
The 207,000 sf Florida property, built in 1989, was an all-cash transaction and the price was around 20% under replacement cost.
It was 94% leased at closing with no tenants due for renewal for several years.
Deka Global has a non-discretionary relationship with ING Clarion so both parties must agree on each transaction for a final closing to happen.
The investment strategy in the United States is to buy only office buildings, shopping centers and industrial properties in major metropolitan areas around the country.
The cap rate requirements for these deals are in the range of 6%, based on a projection of where the net operating income will be in the second or third year of ownership.
In some cases, the cap rates could be as low as 5.5%, providing the property could be stabilized in the second or third year.