News from 02/19/2008
Office market: Upswing gains momentum—markets in good condition
The upswing on the German office market gained momentum in 2007. In the real estate strongholds of Berlin, Düsseldorf, Frankfurt, Hamburg, Cologne, Munich and Stuttgart there was a total turnover of 3.42mn sqm of office space last year—a 12.7% hike compared with 3.03mn sqm in 2006. This result was submitted by the research group “Market Analyses and Demand Forecasts” from the Gesellschaft für Immobilienwirtschaftliche Forschung, or Association for Research in Property Economics (gif). Moreover, the report documents increases in peak rents and average rents in almost all of these locations. Thomas Beyerle, the director of the research group, elaborated: “The optimism prevailing on the commercial property markets can be substantiated with unequivocal figures for 2007.” The past year, however, fell just short of the historical turnover record set in 2000. The classical year end rally was also absent in the last quarter of 2007. This was not assessed by gif, however, as a sign that a turning point is threatening. On the contrary, gif maintains that the German office market is still fundamentally in good shape. Furthermore, gif deplored the lack of new construction projects at most locations until 2009.
Deutsche Euroshop: Two-digit profit growth expected through 2012
DES Deutsche Euroshop AG, quoted on the M-Dax, is targeting an annual average growth in turnover in the single-digit and in profits before interest and taxes in the double-digit range. Chairman of the board Claus-Matthias Böge said in an interview with the magazine “€uro” that the turnover of DES will rise by 17% to €108mn in 2008. Profits before interest and taxes will increase by 21% and profits before taxes by 34%. According to the manager, growth in 2008 and 2009 will be particularly high because completely rented shopping centers are to be opened this year in Hameln (Hamlin) and Passau. At the shareholders’ meeting, according to Böge, the management intends to propose the same dividend as last year (€1.05 per share): “Next year, it could be somewhat more,” he said. Due to current high prices, investing in new shopping centers, district centers, discounters and specialized markets can't be considered in Böge's view. He announced, however, that DES is going to “get into one or two projects as a financial partner of the property developer ECE.”
Retail: Investment volume increases 8% in Europe
According to Jones Lang LaSalle (JLL), retail property with a volume of €7.3bn was transferred in Germany in 2007, thus attaining 26% of such investment on the European continent. In total, a volume of €28.2bn was reached in continental Europe last year, with an emphasis on shopping centers (€17.6bn or 63% of the total volume). Equity capital oriented investors dominated the buyers’ market. For 2008, JLL is expecting high demand for core objects with value increase potential. High transaction volumes were predicted for Germany and Scandinavia, among others.
Frankfurt: Municipal firm can build on Naxos area
Frankfurter Aufbau AG (FAAG) has received the planning board's approval for partial development of the Naxos area near the inner city. The municipal firm can now build 6,000 to 7,000 sqm of apartments on the Waldschmidtstrasse and corner of Wingertstrasse location, the daily newspaper Frankfurter Allgemeine Zeitung (FAZ) reported. Development of the remaining area with approximately 3,000 sqm of residential space is to be assigned to a cooperative within the framework of a European wide public bidding process. The purchase price for the area should be €850/sqm, with a maximum building height of 2.2 stories. The city acquired the plot in 2006 for some €21mn. As the land is to be handed over under perpetual lease, however, the originally targeted yield of €10mn for the sale will not nearly be reached, according to the FAZ.
Bilfinger Berger: Stock repurchase for €100mn announced
Bilfinger Berger AG, Germany's second biggest construction company, has announced a buyback of up to €100mn of its own shares. The M-Dax listed firm stated that it has no intention to cancel the shares it buys back. Instead, the concern wishes to maintain financial flexibility for acquisitions and to safeguard its growth strategy. It claims that, in view of current low price levels, current quotes for Bilfinger Berger stock are far from being an adequate reflection of the company's value.
UK: Commerzbank headquarters in London sold at a loss
New Star Asset Management has sold the London headquarters of the Commerzbank at a loss. New Star’s UK Property Unit Trust, Great Britain’s second-largest property fund, acquired the property measuring 11,200 sqm in fall, 2006 for £147mn (€195mn). It has now gone to Evans Randall for £127.5mn (€169mn). Nonetheless, fund manager Roger Dossett sees this sale as an “encouraging sign” for Great Britain’s crisis-ridden commercial property market and a reflection of considerable interest on the part of the investors. New Star announced its intention to invest approximately £60mn of the proceeds in property stocks.
Morgan Stanley Real Estate: Office building taken over in Tokyo
Morgan Stanley Real Estate Investment GmbH has acquired a Citigroup office building in Tokyo for its open mutual fund Morgan Stanley P2 Value. The purchase was effected by a Japanese property firm in which Morgan Stanley P2 Value holds a 50.46% majority. Morgan Stanley is quoting the building's market value at 49.4bn Yen (€316.1mn). A participation value of 24.9bn Yen (€159.5mn) will go to the fund. Within the framework of a sale and lease back transaction, a Citibank subsidiary signed a lease that will run until December, 2016 for the property's 19,879 sqm.