The uncertainty in the market is leading to more off-market transactions, according to Benjamin Koch, managing director and head of business development Europe at SFO Capital Partners, a London-based global real estate investor and investment manager.
Speaking to PropertyEU at the Expo Real trade fair in Munich, Koch said he was being offered ‘two to three off-market deals a week’ across Europe at present, providing his firm with interesting new opportunities.
‘I like to think that I am well-connected in the industry, but this is unusual. More than before sellers are following this route, apparently because of the uncertainty in the market,’ he said.
SFO’s focus is on value-add properties. The company is active in eight countries, of which seven are European jurisdictions, as well as the US. It has acquired €2 bn worth of assets since its inception in 2015, and just this week announced the successful completion of the sale of the Artemis portfolio originally comprising 11 office assets, located in various A- and B-cities across Germany.
Koch previously worked for Swiss Life Asset Managers for 15 years before joining SFO a year ago. Leveraging this experience, he says he is ‘constantly on the lookout for investments’.
Although SFO has traditionally been active in the office and residential sectors, it recently added logistics as another ‘strategically prioritized vertical’. The company has also moved into commercial development and is currently implementing a full refurbishment of an existing mixed-use scheme in Stuttgart. Said Koch: ‘Our value-enhancing approach encompasses complex repositioning challenges as well as high volume construction measures. Nearby Milan, we are now also involved in a logistics greenfield development.’
Koch said that given SFO’s broad range of geographies and target sectors, it could afford to be selective when hunting for deals. ‘Quite a lot of investors face limited room for manoeuvre, but in fact we can do cherry-picking to secure real estate with superior risk-adjusted returns. Even in the current market environment we don’t have to compromise on the quality of the deal.’
Nonetheless, the company has to contend with the same issues of inflation, higher interest rates and supply problems facing the industry as a whole. Said Koch: ‘We have to calculate with contingencies, and be careful how we organise the debt financing, plus we look carefully at construction budgets anticipating applicable ESG standards. We naturally only underwrite margins that reflect the changed macro environment.’
In the last 12 months SFO has carried out five deals across Europe - in London, Paris, Stuttgart, Venlo (the Netherlands) and Milan. The estimated aggregated gross exit value exceeds €300 mln. ‘We always focus on the deal-specific return-risk profile and we always work with partners,’ Koch said. ‘We do not provide the asset management services in-house, so we collaborate with best-in-class co-investing operating managers in each market segment. This is a key feature of our business model.'