DEAL WATCH 2012: Germany Dominates

Germany was the place to be in the final months of 2012, despite growing caution about the market’s safe-haven status

Norges Bank, manager of Norway’s massive sovereign wealth fund, went marauding for prime European real estate again in early October. Not surprisingly, it chose Germany as the location for its latest mega deal, and French insurer AXA -partner on previous deals - as its cohort.

The dominant theme in real estate in the last few years is the overwhelming focus on prime assets in the UK, Germany and France. Germany has been pick of the pack recently. Although an analysis of the October deals is little more than a snapshot, it is interesting that 12 of the largest transactions recorded by PropertyEU Research took place in Germany. The country’s dominance increases as we zoom in on the largest ticket sizes: six of the top 10 were in Germany, three in the UK and one in France. Germany has been the only market among its peers to show consistent, albeit light, GDP growth. In terms of real estate, it has five to seven city markets which offer the type of big-ticket, rime income-producing real estate that investors are keen to acquire as a bulwark against recession and low bond yields. For the Norges joint venture the bulwark was a 72,000 m2 office and retail building on Berlin’s Kurfürstendamm Boulevard and an 81,600 m2 office building in Frankfurt’s central business district. ‘This deal is in line with our strategy to build our real estate portfolio by initially investing in large, well-developed markets alongside partners with aligned interests,’ said Karsten Kallevig, chief investment officer for real estate at NBIM. The investment volume came to €784 mln. In the current economic climate, owners are generally reluctant to trade such prime assets unless the owner is in hock to a bank or the bank itself is trying to clean up a balance sheet bloated by excess in the boom years. UK lender RBS was the vendor in this case. Norway’s Pension Fund Global has over €440 bn in assets and is more interested in putting its money to work in the market than withdrawing it. Its entry into Germany followed on from the initial JV deal with AXA Real Estate in France 14 months earlier when Norges took a 50% share in a €1.4 bn portfolio of prime office assets in Paris. The seven properties were owned by AXA’s French insurance division. The joint venture then went on to invest in a €290 mln portfolio of French offices.

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