HIH ties up with Boxberg in search of German opportunities

Hamburgische Immobilien Handlung (HIH), the property arm of German private bank M.M. Warburg & Co, is teaming up with UK private equity group Boxberg Capital on a major value-add and opportunistic investment drive in Germany.

The 50-50 partnership, known as HIHBoxberg Capital, will be based in Hamburg and will be given first right of refusal by both HIH and Boxberg for all investment opportunities emerging in the German commercial property market in the value-add and opportunistic space. 'This is a very powerful proposition and shows the commitment given by both players to the new platform,' commented Robbin Herring, co-founder of Boxberg and formerly in senior positions at Deutsche Bank's real estate private equity group, at Citi Property Investors and in the real estate division of Apollo Management.

Herring said the joint venture will be independent from its sponsors. ‘'There will be no obligation to contract assets or property management services from the sponsors. This is to show that the platform will not be a fee business but will be aimed at promoting investment.'

Commenting on the rationale behind the new partnership, HIH's CEO Erik Marienfeldt said that while investors in Germany have been focusing on core acquisitions, there is little competition for value-add or opportunistic investments at a time when a vast amount of distressed real estate is expected to come to market. 'We believe this platform fills the gap in the current market offering. We are well positioned to respond to the opportunities resulting from the deleveraging effort and the illiquidity that increasingly defines the German commercial real estate market.'

The partnership will consider both direct and indirect real estate as well as preferred equity or mezzanine debt opportunities in major investment locations in Germany such as Frankfurt, Hamburg, Berlin, Dusseldorf and Munich. The investment focus will be on single assets or small portfolios in good locations, with an urgent need for capital expenditures. The JV will aim for double-digit returns.

'We will concentrate on ‘broken core’ - assets that are vacant or with short leases that have to be refurbished before finding a new tenant,' Herring added. 'We see that the largest discount to value today is certain non-core situations with a value-added component and we will aim to buy these properties at a discount and to reposition them as core.'

Another main focus will be 'distressed seller situations', he added. 'A large number of overleveraged structures are expected to be liquidating in the next years. In addition, various German open-ended funds will need to be liquidated over the next few years and this could involve around EUR 20 bn of assets. There are also approximately EUR 20 bn of CMBS with German collateral that are in special servicing or in expiring CMBS structures. These are the type of opportunities we will be focusing on.'