News from 11/19/2008
Alstria: Rise in earnings and FFO, slump in consolidated net profit
During the first nine months of the current year, alstria office REIT AG boosted its earnings and its operating performance (FFO). The Hamburg-based company announced that, compared to the first nine months of 2007, earnings rose by 25% to €75.8mn, while the operating performance, compared to the same period during the previous year, soared by 35% to €29.9mn. It also said that in the context of its REIT status, the acquisitions made at the end of 2007 made a significant contribution to this growth. However, during the period under review, the consolidated net profit plunged to minus €5.7mn. Compared to the consolidated net profit of €55.5mn in the first nine months of 2007, this means a setback of approximately 110%. According to alstria, the reason for this slump is a non-cash loss of €29.8mn in devaluations of real estate held as financial investments and an additional loss of €1.2mn due to the devaluation of financial derivatives. Alstria’s managing board has nevertheless confirmed its prediction for the entire year, declaring that alstria is “well on track to achieve its financial goals for 2008,” thanks to its “strong operating performance.”
WGF: Issuing house founded for closed-end property funds
In addition to mortgage bonds directed mainly toward private investors, WGF Westfälische Grundbesitz und Finanzverwaltung AG now also wants to issue closed-end property funds and has founded deboka Deutsche Grund & Boden Kapital AG for this purpose. According to an announcement from deboka, the first fund, with a volume of €18mn, is to go on sale as early as January, 2009. It said that a 6% annual yield is expected and that distributions will take place each quarter. In the future, the company wishes to issue two to three funds a year, each with real estate that is bundled according to various investment regions. Regarding investment strategy, deboka wants to acquire only residential and commercial properties in attractive locations characterized by a positive population structure of credit-worthy tenants and above-average earnings. Members of deboka’s supervisory board, among others, are Michael Hahn, the founder and majority shareholder of stock market listed Hahn-Immobilien-Beteiligungs AG, and René Krüger, the CEO of the Axel Springer subsidiary, wallstreet:online capital AG.
Berlin: Chamartin-Meermann stops construction on “Pergamon-Palais”
For the time being, construction work on the building complex called “Pergamon-Palais” on the Museumsinsel (Museum Island) in Berlin has been halted. The reason given by the Chamartin-Meermann- Group for this suspension is insecurity in the international financial markets and the failure of a bank to honor already approved financing. At the same time, the firm said, it is in financial negotiations with other banks. CEO Heinz H. Meermann told the daily newspaper “Die Welt,” “We are certain that we can still compensate for the delay on the ‘Pergamon-Palais’ project.” The planned development is a four-part building with a total of approximately 10,700 sqm of usable area at a cost of some €50mn. Chamartin-Meermann declared that their project at Askanischer Platz 1, now in the shell construction phase, is on schedule and will be given over to the tenants in the summer of 2009.
Reutlingen: GfK study favors ECE shopping center plans
A study performed by the marketing research institute GfK GeoMarketing recommends the construction of an ECE shopping center in Reutlingen's city center. The post office area location favored by the Hamburg-based developer is “fundamentally suited to such a development,” the city-commissioned study declares. However, it emphasizes the necessity of limiting the sales area to a maximum of 23,000 sqm or large-scale revenue redistribution would be probable. If the center were to be built at the considered location, it would elicit particularly positive effects in the northern part of Wilhelmstrasse. Revenue losses would be foreseeable, especially in sections of the historic center that are far away from the post office area.
Retail: Munich still most expensive prime location, at €300/sqm
This year, with a peak rent of approximately €300/sqm, central Munich again leads the Rent Price Ranking compiled by Comfort Group, the consultation firm seated in Düsseldorf. Prices rose there by more than 5%. In prime locations in Cologne and Berlin (second and third place), they climbed by 2% and 8.7% respectively, thus reaching €255/sqm and €250/sqm. Spitalerstrasse in Hamburg remains in fourth place at €235/sqm, above the Zeil in Frankfurt (€230/sqm) and Königstrasse in Stuttgart (€230/sqm). After Berlin, the biggest rent increase was registered in Nuremberg, where perceptible improvements in location and supply are said to have led to a renewed 8% rent hike, to €150/sqm. Nationwide, Comfort is expecting rent growth of 4.4% in prime locations for all of 2008.
Construction: Residential buildings fall, commercial buildings rise
During the first nine months of 2008, 133,000 apartments were permitted in Germany, 2.2% less than during the same period in the previous year. The Federal Statistical Office (Destatis) reported that permits for single-family houses (-5.6%) and apartments in duplexes and apartment houses (-2.5% and -2.7% respectively) declined in particular. On the other hand, space in non-residential buildings increased by 187.8mn cubic meters (+22.0%). This growth was said to be due mainly to projects developed by non-public builders (+22.6%). However, public builders also surpassed last year’s level (+13.5%).
UK: JP Morgan plans new European headquarters in London
For £237mn (approximately €287mn), the U.S. bank JP Morgan has acquired the leasehold for a plot in the Canary Wharf business district of the Docklands of London from Songbird Estates, the majority shareholder of the Canary Wharf Group (CWG). The agreement has already been signed for the plot on Southern Riverside and has a 999-year lifetime. The contract also stipulates that CWG will develop and build a new, up to 177,000 sqm, JP Morgan European headquarters there. Infrastructural work is already underway. Commencement of building construction will wait until JP Morgan—in accordance with market conditions—gives a green light. At the moment, the bank assumes that construction will be completed by 2013. It wants to consolidate its offices, now strewn across the City of London, in the new building. Should JP Morgan cancel the project, CWG would be paid for its performance to date and would receive an indemnity payment amounting to approximately €89mn. Jones Lang LaSalle and CB Richard Ellis brokered the conclusion of the leasehold and development contract.
Italy: Demand for shopping center floor space unbroken
Despite the financial crisis, Italy’s free-standing retail facilities are operating successfully. The demand by retailers for space in existing shopping centers and malls is unbroken, according to a Savills market report. Such international chains as Fnac, Footlocker and Zara are said to still be particularly active and a number of supermarkets and retailers are settling into new shopping centers throughout the country, the report continues. At the moment, peak rents in first-class shopping centers for units of 150 sqm are currently at €800/sqm/year. For units between 1,000 sqm and 1,500 sqm, Savills said the price is €300/sqm annually. At present, there are some 795 shopping centers with a total floor area of 11,6mn sqm in Italy. This year, ten new centers have been opened. Another 1mn sqm are said to be under construction. In the future, the study predicts that the number of as yet unfinished projects will decline.