Real Estate Forum - November/December 2009

global digest

news around the world

Rreef Targeting €250M for German Fund

Deutsche Bank’s alternative assets group Rreef is launching a German Special Fund to target office and retail income-driven core assets around Europe, especially in UK, France and Germany, says its new managing director Georg Allendorf.

He says the new European Core Recovery Fund is aiming for €250 million of equity, and will continue to take institutional commitments at least through 2010. The legal leverage limit is 50% but the fund is unlikely to seek debt financing above 40% or 45%. Final target AUM will be somewhere between €400 million and €500 million.

“We will be investing in 2010 and 2011,” Allendorf says. “German Special Funds don’t really have a cut-off; you can raise commitments indefinitely, so we actually are cutting ourselves short.” German special funds in the past have generally targeted returns for investors of 6% to 7%.

“The preferred asset profile is core investments—prime assets in major locations throughout Europe,” Allendorf says. “We aim to have the majority of fund returns coming from income. We are not really value-appreciation seekers but believe this is a good time to acquire very strong assets that offer substantial cash flow.”

The fund will also have some allocation to southern Europe and the Nordic regions, but Rreef will not be providing seed assets. “In our opinion, it has been proven that seeding a fund with assets might have been a good idea a couple of years ago, but it’s not what clients seek at the moment,” he says. The first equity commitment is expected to be signed this year or early next since interest has been lively.

“There is interest in a product like this because everyone believes we are in a cyclical industry and expects some upturn in coming years,” he says. Some commitments are likely from institutions that have not invested in real estate before.—Allan Saunderson, Property Finance Europe via GlobeSt.com

C&W: London Banks’ Growth Is Exception

European financial capitals can expect subdued performance in terms of banking office take-up as the wider sector remains on the cusp of significant change, according to a new report by Cushman & Wakefield. London is the single exception, with banks leasing more space.

Although the global economic crisis has pushed down bank take-up of office space in the first half of the year by 53%, compared to the first half of ’08, the rate of decline has slowed markedly. Whereas previously London saw the biggest drop in activity in the six months to end of the first quarter, the UK capital has remained relatively healthy and was the most active European market in the third quarter. Prime office rents are widely accepted to have bottomed out and, with an increasingly limited supply of newly available space, banks have begun to react to attractive terms to consolidate operations into one building or upgrade accommodation quality.

With rents in all other major European financial cities yet to bottom out, the trend in London is not likely to spread across the Continent until the latter half of 2010 at least, Savills says. With banking absorption subdued in markets such as Paris—where only 1,000 square meters of such deals was transacted in the second quarter—pent-up demand for space is likely to drive take-up much higher once economic conditions become more favorable and banks have clarity over their future.

C&W’s EMEA head, Guy Douetil, says, “After 12 months of darkness with almost no take-up from the banks, we are beginning to see some light at the end of the tunnel. Banks are now beginning to make major decisions where significant opportunities exist to consolidate or save money in their headquarters locations. London has been the first to benefit and we expect other Western European capitals to follow in 2010.”—Allan Saunderson, Property Finance Europe via GlobeSt.com

Divan Hotels to Open
$90M Hotel in Iraq

As part of its expansion efforts, Turkey-based Divan Hotels plans to open a five-star hotel in Erbil, Iraq in the first half of 2011. The investment is valued at $90 million.

The Divan Erbil will contain 146 guestrooms, 76 suites, two presidential suites and four lofts. Additionally the 484,000-square-foot project will have six meeting rooms, a ballroom, fitness center, indoor pool, four restaurants and a nightclub. Thirteen offices and shops will also be offered for lease. Elegan Tourism Inc. owns the plot of land and will fund the project.

“We believe that an international-stan-dard chain hotel will meet an unserved need in this market and for that reason, we resolved to make this investment,” says Elegan chairman of the board Sarp Turanlıgil. “We feel that we are particularly lucky to be able to join a visionary Turkish hotel chain like Divan Hotels, especially in light of the growing role that Turkish companies and executives play in the local business community.”

In addition to the newly announced project, Divan will open three hotels in the first quarter of 2010. With the Divan Istanbul Asia, the Divan

Çorlu and the

Divan Ankara Çukurhan, the company will own a total of nine hotels.

“Our objective is to build

Divan Hotels into a premium regional chain of city hotels, with properties in the key cities throughout our region. We decided to start by focusing our international expansion on untapped markets offering outstanding potential for economic and commercial growth,” said general manager Jeop Bakx, in a release.—Katie Hinderer

“We believe that an international-standard chain hotel will meet an unserved need in this market and for that reason, we resolved to make this investment.”