WGF set to launch new KAG unit

German real estate and finance group WGF submitted a request on Monday to set up a new fund management KAG unit which will allow it to launch a wide range of special funds (spezialfonds) for institutional investors from next year. ‘We expect to get the approval from the German Federal Financial Supervisory Authority (Bafin) by the first quarter of 2011,' the group’s chairman Pino Sergio said in an interview with PropertyEU on the first day of the EXPO REAL fair in Munich.

After approval, the Düsseldorf-based company will be able to set up and manage special property funds for institutional investors. The company has poached Hans-Dieter Marin from LB Immoinvest and Walter J. Helbach from Deka to take on the role of managing directors for the new unit, which will be named WFG Immobilien Investment. WGF’s board member Raffaele Lino said the move represents a further attempt by the company to bring the capital markets to the real estate industry. ‘

We have always been very innovative on funding, for instance by making use extensively of mortgage loan issues. With the creation of a KAG, we will be able to increase diversification in our sources of capital while becoming one of the first KAG asset managers in Germany which are now controlled by a bank. Because we do not rely on bank funding and other intermediaries, we will be able to take more risk and offer very competitive returns to our institutional investors.’

According to Lino, the KAG unit plans to set up two special funds focusing on hotels and smaller retail units respectively. ‘The retail vehicle will have an initial seeds portfolio of around €55 mln, and will focus on smaller retail units and supermarkets leased to retailers such as Rewe or Aldi.’ Furthermore, the company has put together a portfolio of four hotels and intends to transfer the properties into a new EUR 100 mln spezialfonds, focusing on three and four-star budget hotels.

The assets are located in Hafencity Hamburg, Berlin Alexanderplatz, Essen and Frankfurt. ‘Our strategy is to buy vacant office buildings in good central locations which can be easily redeveloped into hotels. After the redevelopment is completed, we plan to transfer the completed assets to the new fund, because our investors do not want to bear the risk of development,’ Lino said. ‘Low budget hotels are the asset class that is currently showing the highest growth potential in Germany’, added Sergio.

WGF Finance Group currently employs just over 100 people. The core of this group of companies is WGF AG, founded in 2003 with property trading as its field of business. Hotel development and the WGF "RealWertPlus" programme represent new strategic business areas. WGF AG is German market leader in mortgage bonds. Its subsidiary Deutsche Grund & Boden Kapital AG issues closed-end property funds.