GERMANY - An unnamed European institutional investor - understood to be a German pension fund - has acquired a fully rented 274-unit residential block in a Munich suburb for €42.1m.
Most of seller Patrizia's international clients are German pension schemes. "Our institutional customers are looking for core investments in residential property in Germany and Europe," said Patrizia spokesman Andreas Menke.
"After the crisis, we see the trend that residential property will be in their focus. Especially for institutional investors, it offers excellent opportunities. Residential property is - in the right location - a solid value, calculable, has no risk concentrations, and does not correlate with other asset classes."
Menke also cited stable cash flows offered by low-vacancy rentable residential - a key requirement for pension funds - and evidence that institutional investors intend to increase their real estate assets by €20—25bn over the next two years.
Optimism over German residential belies a generally bearish macro outlook. Menke cited immigration from economically weaker regions and a rising trend toward urban living because of good infrastructure and lower commuting costs.
"Because of the quality and location of our real estate, we are very optimistic that prices and rents will continue to rise," said Menke, forecasting residential property re-sales reaching at least last year's 657 units.
Patrizia believes investors that have cleared their direct portfolios over the past few years are beginning to rebuild them with core residential.
The German market looks favourable in a pan-European context: despite a recent influx of residential on to the market, following a construction boom in previous years, residential supply is currently at 70—80% of demand, Patrizia said.
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