Institutional investors will drive the further development of the listed market in Germany, predicted Ulrich Holler, CEO of DIC Asset, during a panel discussion at the annual EPRA conference in London last Friday. ´The retail market is still far away,´ he noted. ´It will have to go the institutional way.´

German retail investors are unlikely to become a major force any time soon, agreed Christian Ulbrich, CEO of Jones Lang LaSalle EMEA. 'In 2010, only 5% of retail investors in Germany owned shares,' he pointed out. 'The German open-ended funds continue to address the needs of private investors in Germany.'

John Carrafiell, managing partner of Greenoak Real Estate, called on 'large institutions who genuinely want great exposure to Germany to stand behind management teams that could become champions'. While conceding that Germany does not have a long list of well-respected managers, he noted that investors had acquired over EUR 30 bn of property assets in Germany in the boom years of 2005-2006 and that a large number of EUR 500 mln-plus portfolios were already sitting with banks, or would do so within the foreseeable future. 'These assets are in the wrong hands...if the funds were restructured, there would be an instant investor base.'

Pointing to institutional investors in the Anglo-Saxon world, but also France and the Netherlands, Carrafiell said there were many examples of institutional investors creating low-levered vehicles which could eventually be converted into listed companies. 'This is not a non-European example. There are lots of examples of Dutch investors and sovereign wealth funds doing that. This is a potential route.'

Olivier Elamine, CEO of Alstria REIT, said it was difficult to put together big portfolios due to the structure of the German market. 'We cannot just take a macro-economic view...there are a number of things that are very specific to Germany.' While agreeing that the market capitalisation of the German market needed to be increased through support from institutional investors, Elamine said it would not occur overnight. 'The real estate industry is very slow. Building up capital markets will take time.'

Carrafiell noted that private investors would only become interested in listed real estate further down the track. 'Maybe in five or 10 years if listed companies generate stable returns.' He added that the open-ended fund sector was a very successful platform and that it would be difficult to compete with. 'There is a bifurcation between open-ended funds with liquidity who are supported by banks and those without, but the sector will continue to exist. If we want to grow the sector, it will be difficult to penetrate the German open-ended funds. For the banks the fees are very attractive.'

A ray of hope is that institutional investors are showing greater interest in real estate as an investment, Ulbrich pf JLL added, pointing to the growing number of ´spezialfonds´ or non-listed special funds targeting institutional investors only. 'These funds which are pure plays focussing on one asset class are very attractive to institutional investors.'

Ulbrich noted that now was not a good time for banks to float new companies given that any new vehicles would most likely trade at a dicount to NAV. But a number of existing listed companies were very successful, he added, pointing to Deutsche Euroshop and the recently listed residential specialist GSW. 'These are successful and well-run companies. The market should continue to develop these sorts of vehicles.'

Click on the following link to read the article 'Alstria chief calls for conversion of German funds into listed vehicles'.

 

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