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Property Review Australia

GERMAN real estate fund manager, the €5.5 billion Real IS, is launching a new property fund to invest in Australia, because it offers superior returns and better investment opportunities than Europe, particularly after Brexit.

The Munich-based fund manager said the fund is seeking to acquire a portfolio of office, industrial and retail properties.

The key markets will be Melbourne, Brisbane and Sydney.

Real IS director Jochen Schenk told IP Real Estate that the fund offers German institutional investors an answer to the shrinking returns from core and core-plus properties in Europe, particularly in Germany.

“There are many good arguments in favour of setting up an institutional property portfolio fund in Australia, including investing removed from Brexit uncertainties.

“It is time to chart new courses, and, for institutional investors as well, the right moment has come to take that step towards Australia,” he said.

Schenk said Australia’s economy is another reason.

“Ongoing economic growth – forecast to continue at 1-3% through to 2018 – as well as low public debt and a relatively young and growing population, have all combined to change the mindsets of many institutional investors,” he said.

In contrast Germany’s GDP growth rate is forecast to be 0.4% in the Q4/16 and 0.3% in 2017 – before it is projected to rise to 1% in year 2020, according to Trading Economics.

Real IS chief executive Georg Jewgrafow said Australia also offers better returns than Europe.

“Distributions here may carry a five before the decimal point. Investments can be made in good locations at a price level that enables returns of this kind,” he said.

The Munich-based fund manager is no stranger to Australia after acquiring its first property in 2005.

Before Asian investors dominated the Australian property scene, Real IS and its German peer Sachsenfonds made headlines pre-GFC with significant acquisitions.

At the peak of 2012, Real IS owned in excess of $1.6 billion worth of commercial properties in Australia.

Real IS’ acquisitions in Australia over the past decade include:

• 400 King William St Adelaide for $100 million (October 2012) on a yield of 8.0%;
• 77 Grenfell St for $70 million (May 2011);
• 151 Pirie St Adelaide for $61 million (May 2006);
• Defence Plaza at 661 Bourke St in Melbourne (2011) for $100 million.
• The Mercer Building at 11-33 Exhibition St for $136 million
• SA Water House for $91.7 million
• 10 Dawn Fraser Avenue, Sydney Olympic Park for $95 million (December 2008)
• Australian Tax Office complex at 21 Genge St Canberra

However Real IS has been winding back in recent times, by selling a number of properties, these include:

• 11-33 Exhibition, which it resold in December 2007 to Charter Hall for $194.1 million.
• 10 Dawn Fraser Avenue, Sydney Olympic Park for $80 million in April this year
• 151 Pirie St Adelaide for $72 million in December 2014

Real IS currently owns nine properties in four cities.

Property Review Australia