European Property Awards.
The European Property Awards were presented for the first time at EXPO REAL 2005. Together, the British magazine Property Week and the German Immobilien Zeitung gave out awards to the best in the real estate industry in front of roughly 500 guests. The twelve winners were:
Eckard John von Freyend, IVG Immobilien AG and Paul Marcuse, Axa Real Estate Investment (real estate experts); Karstadt, Dawnay Day, Hilco and Morgan Stanley, Metrovacesa, Cecina (deal); Eurohypo AG and Morgan Stanley (financing); Cushman & Wakefield Healey & Baker (commercial real estate agents); Hines (office development); Sonae Sierra (commercial retail development); Prologis (industrial and logistics development); BP (real estate owner/user); and Birmingham as the city of the future.

In Britain the most experienced players said the market had peaked two years ago. Many of them now acknowledge they were wrong as the market has continued to rise, with the largest central London properties now selling at far higher prices than anyone could have foreseen.

Earlier this year a group of Irish investors led by the entrepreneur Derek Quinlan paid more than 530 million British Pounds for a block in Knightsbridge – 100 million British Pounds more than the vendor the BP Pension Fund had hoped to raise. If anything, the market has got even hotter since then, with Middle Eastern investors earlier this month agreeing to pay a client of LaSalle Investment Management 425 million British Pounds for a block on London’s Oxford Street. Again, this was 110 million British Pounds more than the original ’guide’ price.

What Speaks for Germany
All of which leaves the most adventurous players looking to the continent to invest in property. On top of this Germany in particular looks cheap right now. While the best property in Britain and Ireland yields four to five percent, British investors see prime German yields at 6.25 percent, secondary property yielding seven percent and tertiary property yielding nine or ten percent.

No matter that the German economy is still flat on its back. With interest rates in the Eurozone still low compared with Britain, UK investors can only see the arbitrage between the rate at which they borrow and the rental income they receive in return. Not only that, with an outside perspective they reason that through its sheer scale the German economy must recover sooner or later, holding out the prospect of both capital and rental growth.

Reit Asset Management Head Chris Horler told Property Week: “It’s like the UK in the early 1990s. In those days, the Germans were coming across to Britain and buying up property and it worked for them. It seems to be the other way around at the moment. But a lot of Germans don’t see the value.“

The British on a Shopping Spree in Germany
However, in 2004 the Germans were by far the largest investors in Germany, buying 1.2 billion Euros of property, and they are doing their best to emulate this in 2005. So far this year Reit and Vincent Tchenquiz’s Consensus have tried to buy the State of Hess’s one billion Euro estate, only to be pipped by Commerz Leasing und Immobilien Gruppe, a subsidiary of the German Commerzbank. However, Reit is still planning to spend two billion Euros in Europe over the next year, again in the hope of finding better value than in the UK.

Another big UK buyer planning a continental spending spree is Sol and Eddie Zakay’s Topland. It has 2.2 billion Euros to invest in Europe over the next 18 months, and Property Week understands it is front-runner to buy an 1.4 billion Euro portfolio of Vendex department stores in the Netherlands owned by KKR, Cinven and Permira. Privately owned Scottish developer and housebuilder Miller Group is also charging into Germany. It has bought a portfolio of twelve supermarkets in Germany for 37 million Euros from German developer Prebag Gewerbebau. Miller Developments Chief Executive Phil Miller explains why: “We like Germany for three main reasons. It has a good economy that is coming out of its problems; we like the comprehensive planning system; and we think the pricing is slightly out and likely to get better. We expect to secure further retail investment in Germany both directly and in partnership over the coming months.”

Likewise entrepreneur David Roberts, the Co-head of investor and active German buyer Edinburgh House, told Property Week: “It has been increasingly difficult to find good value over the last year in the UK. With the cost of borrowing close to six percent, yields sub six percent, and retailers having a tough time, there is not likely to be rental growth over the medium term. German retailers are faring no better but yields are better than the UK. The cost of borrowing is better in Germany. Once we started looking there, the availability of deals grew. There are many UK investors looking at the country for these reasons.”

Investments in an Exciting New Market
Perhaps the biggest statement of intent, though, came just this week. Ian Henderson, who was credited with reviving Britain’s biggest property company Land Securities before stepping down last year, emerged as chairman of a new investment company called Treveria. With an 640 million Euro German portfolio assembled by Guy Naggar and Peter Klimt’s Dawnay Day, the group announced plans to float in London. (Dawnay Day, among others, also had a stake in the purchase of Karstadt Group’s 75 department stores.) Announcing its plans, Treveria said it expects a rise in consumer confidence and German economic output to benefit retail property in particular in what looks set to be a successful flotation.

It appears that the London share-buying public are about to follow the UK’s privately-owned property groups in cashing in on what Britons see as an exciting new market.