Optimum expects 1st close of up to €80m as German residential supply and demand mismatch remains

In an interview with PropertyEU, the company says it has raised €40 mln so far, and with promising discussions with further equity sources it expects to reach €70 - €80 mln upon first close. The overall target is €250 mln.

PropertyEU last reported on Optimum in February when it launched Fund IV just before the Covid-19 crisis hit. 

Founder and chairman, Alberto Matta, remains positive there continues to be a fundamental supply and demand mismatch in Germany’s residential real estate sector, providing significant opportunity to invest in key cities despite the turmoil across European markets.

He says, ‘Residential has proven to be the most resilient asset class during the pandemic. For investors in real estate, the drivers that make Berlin and other cities an attractive proposition are as apparent today as they were pre-pandemic. In the short term, resilience in Berlin’s real estate market has been characterised by continued rent payments and, largely, an absence of defaults, with investors benefiting from safe, stable cash flows during the pandemic.’

Managing partner, Enrico Imbraguglio, speaking alongside Rocco Fioretti in the firm’s real estate investment team, explain that underlining this was Germany’s preparedness to deal with the pandemic relative to other European countries.

Pre-pandemic, low unemployment combined with widespread, above-inflation wage increases over several years ensured the labour force was in a relatively comfortable position when Covid-19 hit.

Mid to long-term, the fundamental supply and demand issue is set to continue.

Imbraguglio says, ‘The volume of construction activity is still inadequate versus an ongoing influx of population in many cities and their suburbs. This is an issue made more acute by potential migration trends post- pandemic. It is conceivable that the large population across Europe made unemployed as a result of Covid-19 might look to new opportunities in Germany.’

Optimum’s existing portfolio has stabilised with Covid-related arrears in the low-single digits. During the peak of the pandemic in April and May total arrears never rose above 20% of the net rental income of the portfolio. The percentage of residential arrears officially linked to the Covid-19 crisis has been marginal (below 1%) proving the relative resilience of the residential portfolio to the pandemic, the company says.

Optimum’s fund IV targets well-located residential and office assets near major infrastructure and employment hubs. The primary target area is Berlin, with selected investments in high-growth, supply-constrained cities such as Hamburg, Dresden, Leipzig, Cologne and Düsseldorf.

While most institutional investors focus on assets above €40 mln, its sweet spot is assets in the range of €10 – 40 mln where there is less competition. Its strategy is typically to create portfolios to be sold to yield-hungry institutions.

The company has around €1.5 bn of total AUM with offices in Luxembourg, Hamburg, London, Berlin, Miami, and New York.

Fund I was conceived as a core plus Berlin property fund in 2009 and closed on €60 mln of equity. It is fully realised. Fund II was also a core plus fund targeting Berlin, and closed on €200 mln.

Fund III was launched in 2014 as core plus fund for Berlin and Dresden and raised €173 mln.

Net IRRs of the first three funds are 14.8%, 15%, and 11.1%, respectively. They achieved net multiples of 2.1x, 2.7x, and 1.6x.

The company also has assets in the US with a focus on New York, Miami, Los Angeles, Boston, and San Francisco via two funds.