Karlin Real Estate poised to enter Dutch market

US investor Karlin Real Estate is on the verge of acquiring an Amsterdam area office building in the Netherlands in its first foray in the Dutch property market, according to managing director Joseph Self.

‘We are currently evaluating a large pipeline of opportunities that cover the spectrum from a regional headquarters acquisition to providing new equity for a restructuring. Generally we are focusing on the four largest Dutch cities and surrounding areas, but we are also interested in select regional locations near transportation hubs. Key to us is finding attractively priced properties that we feel will have a sustainable appeal to existing and future tenants.’ Self told PropertyEU in an interview. He declined, however, to provide further details on the deals.

Los Angeles-based Karlin announced earlier this month that it is opening a new office in London – its first abroad – as part of a new $1 bn (€600 mln) investment strategy in Europe. ‘Generally, at the core of Karlin’s business is the focus on value and entry point,’ noted Self. ‘During the financial crisis in the US we were active in restructuring and repositioning overleveraged assets. As the US markets stabilized we noticed the situation in Europe was lagging considerably, especially outside of the core markets. We looked at our first potential deal in the UK 18 months ago and quickly realised that there could be major opportunities for us,’ said Self, commenting on the company’s recent activity in the European property sector. ‘The opening of the London office this month reflects our ongoing focus on growing our portfolio in Europe.’

Self, who joined Karlin in 2010, has played an important role in the firm’s overall growth having been involved in a variety of opportunistic acquisitions and financings throughout the US with an aggregate value of over $500 mln (€360 mln). He is joined in the London office by associate Gregg Yamauchi.

Karlin Real Estate, the private real estate investment arm of Los Angeles-based Karlin Asset Management, marked its entry into the European commercial real estate market in August 2013 with the £16 mln acquisition of a 169,931-sq ft office building in Peterborough, UK which serves as the European headquarters of foreign exchange company Travelex. Karlin currently has a 600,000-sq ft European portfolio including a distribution building let to Jaguar Land Rover in Ellesmere Port and an office building in Solihull occupied by The Paragon Group of Companies.

Self said the company is concentrating on three strategies; the creation of a portfolio of regional office and industrial properties in secondary cities in the UK, the acquisition and repositioning of regional retail assets in the UK and Ireland, as well as providing liquidity to situational opportunities in a variety of markets including Spain, the Netherlands, Denmark, Germany and Ireland.

Self: ‘We are still seeing a lack of liquidity with little debt financing in the regional markets in the UK and the funds that have traditionally acquired these assets are just beginning to re-enter these markets again. At the same time many of the financial institutions and lenders are seeking liquidity and creating a very attractive environment to build our portfolio. This situation is magnified in our target markets in broader Europe and we are eager to help fill the liquidity gap,’ he noted.

While the company has so far been active exclusively in the UK, it is currently evaluating a number of other investment opportunities in Ireland, the Netherlands and Spain. 'Our initial focus has been in the UK. It was a natural entry point and we were fortunate to assemble a strong local team that helped us quickly execute on our initial investments. The broader UK market is becoming more crowded as compressed yields in London have pushed more and more investors into the regions. We expect this to continue but believe we will be able to buy additional assets at the right levels and we are also expanding our focus more heavily in additional markets.'

As competition in these markets increases, a key advantage for the company going forward will be its high level of flexibility, Self added. 'We are a rare type of investor, especially in the real estate world. Think of us as a hybrid with the broad mandate of private equity, the long-term staying power of a family office and the granular focus of a property company. When you combine these characteristics it enables us to be effective in a wide range of opportunities and situations. We really see ourselves as a solution to near to medium term liquidity problems,' he noted.

Karlin Real Estate has a portfolio of more than five million square feet of office, multifamily, retail and industrial assets and 300 acres of commercial land in the US. It was founded in 2008 in order to purchase assets that were available during the financial crisis. It has since completed over $1 bn of deals in the US and currently also operates a bridge real estate lending platform that has deployed more than $370 mln in debt financing.