Open-ended real estate funds drive capital uptick
German investors’ commercial real estate acquisition profile has long been disciplined and organized: primarily core, with a mid- to long-term hold approach. However, many German buyers are getting creative and diversifying by property sector and deal structure.
According to preliminary JLL data, German capital accounted for $4.4 billion in U.S. acquisitions year-to-date.
Recently Deka Immobilien, a subsidiary of the DekaBank Group responsible for real estate investment and management, announced its plan to launch an open-ended U.S. denominated fund to avoid costly hedging requirement and to be more competitive with local capital. And Union Investment continues to add to its U.S. portfolio, with 2016 acquisitions reaching nearly $1 billion as of August, in markets that include Boston, Chicago and Dallas.
“These funds are currently under allocated in the United States, so we are seeing an increasing amount of German capital pursue U.S. real estate,” says Christoph Härle, International Director, JLL Global Capital Markets.
GOEFs’ traditional investment approach is conservative: acquire core assets at 100 percent ownership and secure lower – but consistent returns. Financing is also conservative, with debt on assets typically collateralized by the fund and average loan-to-value ratios rarely higher than 45 percent.
“Historically, German capital has been one of the longest-standing cross-border investors into U.S. commercial real estate,” says Lucy Fletcher, Managing Director, JLL Capital Markets. “We anticipate their activity in the U.S., will continue to in regards to volume and scope of deal profiles.”