Germany reaffirms safe-haven status with year-end deals

The billion-euro acquisitions of a Karstadt portfolio and 780 mixed-use properties at end-2012 have once again confirmed Germany's status as a safe haven for cross-border real estate investors.

Germany's real estate investment market flared up in the days before Christmas as Signa Holdings, the investment vehicle of Austrian businessman Rene Benko, snapped up a portfolio of Karstadt department stores, reportedly for more than €1 bn. The jewel in the crown was the 60,000 m2 Kaufhaus des Westens (KaDeWe) department store in Berlin.

The iconic retail destination is described as the largest department store in continental Europe, second in size only to Harrods in London.

Around the same time Lone Star, the seasoned US private equity investor, swooped on the 780-asset mixed use portfolio held by TLG Immobilien in another €1 bn transaction.

Other large German transactions recorded by PropertyEU Research during December involved another US player, Tishman Speyer, buying the Junghof building in Frankfurt for almost €270 mln and The Hahn group acquiring 16 retail assets for €140 mln.

Thanks to the year-end flurry of deals, total 2012 investment volumes in Germany came out far higher than predicted, BNP Paribas Real Estate noted. Total real estate investment volumes in Germany amounted to €25.6 bn in 2012, up 9% on the year-earlier period, according to figures from the adviser.

Jones Lang LaSalle also recorded €25 bn of transactions, saying this was the best result in over five years.

'The willingness of investors to sign deals before the end of the year provided a fantastic boost to the transaction volume. The 2013 increase in the land transfer tax in markets including Frankfurt was a decisive factor here,' said Timo Tschammler, management board member at Jones Lang LaSalle Germany. 'We didn’t expect some of the transactions to be registered until 2013.'

According to Frank Pörschke, CEO Jones Lang LaSalle Germany, the extremely stable user market should provide a healthy basis for the investment market in 2013 as well. 'Interest rates remain low and are therefore still attractive for property investors,' he noted.

However, Pörschke said that it is 'essential' that both equity investors and debt providers broaden their perspective and relax their rigid focus on core properties if transaction activity is to benefit from these factors. 'Only then can there be significant growth in the investment volume.'

Foreign buyers accounted for a total share of around 42% of the transaction volume. Remarkably, the four largest transactions - all involving portfolios - with a combined volume of almost €3.5 bn were realised by foreign investors (from Norway, the US, Austria and France).

France - according to data compiled by PropertyEU Research - also saw a busy end to 2012. Mandarin Oriental Hotel Group closed in on the €290 mln acquisition of a hotel and two luxury boutiques on Rue Saint Honoré in Paris. LaSalle Investment Management, acting on behalf of the Abu Dhabi Investment Authority, agreed to buy an office complex in Montparnasse district in Paris for €240 mln and US private equity giant Blackstone acquired 16 distribution assets from Prologis for €215 mln.

PropertyEU Magazine will publish roundups of the European property transactions in December and for 2012 in the January/February edition.

In the meantime, see the attachment below for a provisional list - available only to subscribers - of the top European deals in December. Updates on other key markets and sectors will be presented in Deal Watch alerts in the weeks to come.