Finding the Truffles in an Ambitious EnvironmentSource: JLL Research, Colliers, Savills. Transaction...
Transcript of Finding the Truffles in an Ambitious EnvironmentSource: JLL Research, Colliers, Savills. Transaction...
Page 1 | CORESTATE Capital Holding S.A.
Finding the Truffles in an Ambitious Environment
Tobias GollnestManaging Director Investments
6 September
2018
Page 2 | CORESTATE Capital Holding S.A.
Brief introduction
>17 years expertise in real estate business
Currently: CORESTATE Capital
Formerly Eurohypo, Barclays Capital, Merrill Lynch, FREO
Experience
Tobias GollnestManaging Director
Deal sourcing, acquisitions and structuring
Business plan and portfolio underwriting
Sales
Equity raising support
Key Responsibilities
Key Personal Tasks with CORESTATE
CORESTATE Capital HoldingS.A. | Page 2
Tobias GollnestManaging Director
Developing new product ideas
Tracking investment opportunities
Achieving the best price in & out
Keeping the team at full steam
Page 3 | CORESTATE Capital Holding S.A.
Overview German economy
Source: JLL Research, Colliers, Savills
Transaction volume in Germany(€bn)
Transaction volume by risk profile
Strongeconomy
Record in real estate transactions
Consumer confidence on 17-year high
Strong demand of institutional investors forCore / Core+
Continuing upward trends in real estate
lettings
High spending in private & public
consumption
Prospering labor market
Attractivefinancing market
Investment case
0%
20%
40%
60%
80%
100%
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 H12018
Core Core + Value-Add Opportunistic
23.5 25.330.7
39.8
55.1 52.956.8
2011 2012 2013 2014 2015 2016 2017 H1 2018
Top 7 Rest
25.6
Germany, Europe’s powerhouse and investment market of choice
Page 4 | CORESTATE Capital Holding S.A.Source: JLL Research, Colliers, Savills
Office yields in Top 7 cities (H1 2018) High street yields in Top 7 cities (H1 2018)
Office vacancy & completion Prime yields 1a locations
Strong demand for German real estate further compressing prime yields
3%
5%
7%
9%
11%
13%
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
2012 2013 2014 2015 2016 2017
Completion Vacancy
Real estate environment
0%
1%
2%
3%
4%
5%
6%
7%
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 H12018
Shopping Center Retail Parks Commercial Buildings
2.90%3.35% 3.25% 3.05%
3.45%3.20%
3.50%
Berlin Dusseldorf Frankfurt Hamburg Cologne Munich Stuttgart
3.20%3.30%
2.80%
3.20%3.30%
2.80%
3.10%
Berlin Dusseldorf Frankfurt Hamburg Cologne Munich Stuttgart
Page 5 | CORESTATE Capital Holding S.A.
How to find suitable investment opportunities in the current market environment?
Investment Rationale - Favorable market conditions
With the right partner …
Page 6 | CORESTATE Capital Holding S.A.
One of the leading real estate managers and developers in Germany
Berlin
Calbe
Freital
Hamburg
Rendsburg
Flensburg
Lübeck
Arzberg
Passau
CottbusSchönebeck
Harrislee
Niebüll
Westerland
Schleswig KielHusumHeide
Itzehoe
Malente
Eutin Neustadt
ElmshornBremerhaven
Wilhelmshaven
ZehdenickGroß Glienicke
Burg
Aschersleben
AuerbachWerdau
Reichenb.
Plauen
Bayreuth
Sonnefeld
LichtenfelsBurgebr. Bamberg
FürthSchwabach
Freising
AugsburgKaufbeuren
Schongau
Weißenhorn
Ochsenh.Baiernfurt
Aulendorf
Biberach
UlmGünzburg
Albstadt
Münsingen
Schelkl. Aalen
Reichenbergh
Pforzheim
AbtsgmündNeckarsulmNeunkirchen
Worms
Wolfsburg
Nienburg
Stade
Hameln
SalzgitterLemgoBielefeld
DetmoldLippstadt
MarlReckl.Dortm.
Bo.
Werl
Oberh.Duisb.
Ge.Rating.Sonsb.
Mönchengl.Frechen
Brühl
KölnEuskirchen
TroisdorfNeussHilden
KorbachKassel
Marburg
Koblenz
WiesbadenRüsselsheim
DarmstadtMaintal
Fulda
Suhl Erfurt
Baden Baden
Frankfurt
Rostock
München
Straubing
Schwandorf
Heidenheim
LörrachSingen
Heilbronn
Aschaffenburg
HanauOffenbach
Birkenfeld
Dresden
Halle
Luckenwalde
Brandenburg
Schwerin
Magdeburg
WolfenbüttelHildesheim
Lüneburg
Celle
Nordhorn
Oldenburg
Göttingen
Gießen
Sindelfingen
Acquired properties (selection)Main officeSecondary offices>600
Employees
>100Cities we have invested in
€ 7 bnCurrent mezzaninefinanced properties
€ >5 bnDeal pipelineunder review
34Cities with local representation
7‘050Micro-living apart-ments under operation
28’992Rental unitsunder management
1‘512Network of local agents and brokers
CORESTATE Capital Group footprint
Location, location, location – the real estate mantra
Page 7 | CORESTATE Capital Holding S.A.
A fully integrated investment platform
Investment Management
41
Asset Management
40
Development Management
8
Property / Facility Management
281
ServicedApartments
26
Mezzanine Financing
62Direct Real Estate Debt
• Fund Management• Financing, Legal &
Structuring• Corporate Functions
(e.g. IT, Accounting)
Covering all aspects of the value chain
>600 >100
Covering the entire real estate value chain under one roof
Page 8 | CORESTATE Capital Holding S.A.
CORESTATE’s investment focus
Return
Risk
Core
Core Plus
Value-Add
Opportu-nistic
Retail Mezzanine Financing
Micro Living Office Hotel
Residential
Ris
k-R
etur
n Pr
ofile
Asse
t Cla
ssPr
oduc
ts
Residential II FMCG I EVAP I OpportunityDeutschland
Landmark Building Liverpool Highstreet VIII
CORESTATE is covering all major asset classes and risk-return profiles with its specialized teams
Mixed-Use
Student Housing
Cross-sectoral expertise through full asset and risk class coverage
Page 9 | CORESTATE Capital Holding S.A.
Current investment opportunity: European Value-Add Program I (EVAP I)
Key Facts
Strategy
Value-Add
Focus on Germany (min. 70%)
4-6 investments
Up to 75% leverage
Manage-to-Core exit
Targettimeframe
5 years
24 months to invest
3 years investment horizon
Expected returns*
16% IRR
1.6x Cash on Cash Multiple
*All numbers are pre-tax and pre-promote.
Page 10 | CORESTATE Capital Holding S.A.
Proven expertise of our specialized teams to be implemented via our active asset management approach
Return
Risk
Institutional“demand overhang”
Core
Core Plus
Value-Add
Risk reduction & stabilization of undermanaged assets to achieve exit to
institutional Core investors
Opportu-nistic
CORESTATE’s EVAP I: Manage-to-Core
“Manage-to-Core” investment approach with a targeted return of 16% IRR* and a 1.6x CoCM*
*All numbers are pre-tax and pre-promote.
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Acquisition Targets
In terms of real estate In terms of seller
• Substantial vacancies
• Under-rented situations
• CapEx / investment backlog
• Repositioning need
• Potential for (re-)development
• Undermanaged properties
• Distressed or defaulted situations
• Cash / capital shortage
• Management structure
• End-of-life cycle
• Dispute between shareholders
Manage-to-Core – Acquisition targets…
Page 12 | CORESTATE Capital Holding S.A.
Asset substance / property quality Functional design
Location Rent-roll / tenant quality
… but no structural weaknesses
Page 13 | CORESTATE Capital Holding S.A.
› Re-positioning / development or re-development activities› Re-letting of vacant space› Creation of additional leasing area› Conversion of usage type› Property strategy › CapEx investments› Management of non-recoverable and operating expenses› Marketing
Hands-on Management
Successful management tools
Page 14 | CORESTATE Capital Holding S.A.
Acquisition of an undermanaged office property (12,800sqm) close to Frankfurt am Main
Property with 52% vacancy due to old and outdated establishment of vacant spaces
Asset was marked with a leasehold
Key Tenants: NGK, Merca Leasing, Pronova BKK
Initial Realized
Vacancy 52% 0%
WAULT 5.8 y 6.5 y
Net Rental Income € 1.0m € 2.0m
Purchase/sale price € 13.8m € 31.6m
€ / m² € 1’075 € 2’460
Multiple 12.2x 16.0x
Purchase of an undermanaged property
Purchase of the separate leasehold to create a freehold
Creation of modern office spaces by establishing a new room layout and implementing contemporary design for social rooms, workspaces/open-space office and conference rooms
Initiation of leasing and releasing concept achievement of 100% occupancy within 18 months & increase of WAULT
1
3
4
Key Value Drivers
Combination of free- and leasehold via two separate transactions
Significant increase of building quality through extensive investments
Full vacancy reduction from 52%
1
2
3
Full turn-around of a half vacant office asset in Kronberg
Value-Add Asset Management Initiatives
2
Previous investment project cases (1/2)
Page 15 | CORESTATE Capital Holding S.A.
Located in the center of the high streetRetail & storage property with 8’000 sqm rental surface Property was available at a discount to market value1st and 2nd floor were vacant storage space / kitchen, reachable through elevators (no public use)Key Tenants: REWE, Decathlon, TUI, APCOA
Initial Realized
Vacancy 26% 3%
WAULT 3.7y 7.1 y
Net Rental Income € 2.0m € 2.3m
Purchase/sale price € 24.7m € 48.0m
€ / m² € 3’090 € 6’000
Multiple 12.2x 20.1x
Conversion of vacant storage space into new attractive retail space
New lease contracts with Decathlon und APCOA
Redesigned entrance to gain more common area and enhance frequency
Installation of escalators at entrance to access the new retail space and improve comfort for costumers
Lease prolongation with existing tenants
1
2
3
4
5
Partial asset conversion and enhancement in Lörrach
Value-Add Asset Management Initiatives
Key Value Drivers
Achievement of highly attractive purchase price through CORESTATE’s sourcing network
Creation of new retail space through extensive renovation and conversion of the 1st floor
Significant increase of WAULT with new tenants and prolongations
1
2
3
Previous investment project cases (2/2)
Page 16 | CORESTATE Capital Holding S.A.
Disclaimer
This document is personal to the recipient and has been issued by and is the sole responsibility of CORESTATE Capital Group, a company formed under the laws of Luxembourg (the "Company"), and solely for use at a presentation to potential investors concerning the proposed transaction set out herein (the "Transaction"). This document does not constitute or form part of, and should not be construed as constituting or forming part of any offer or invitation to sell or issue, or any solicitation of any offer to purchase or subscribe for, any shares or securities in the Company or in any other entity, or of the Transaction, nor shall any part of this document nor the fact of its distribution form part of or be relied on in connection with any contract or investment decision relating thereto, nor does it constitute a recommendation regarding the securities of the Company or of another entity, or of the Transaction, which recognize the personal circumstances of the potential investor. Therefore, this cannot be deemed as investment advisory services. The information contained herein is for discussion purposes only. This document does not purport to contain all information that may be required to evaluate the Transaction and/or the Company and/or any other entity and/or the financial position of any of the foregoing. The potential investor should itself seek information from an investment advisor, certified accountant or tax accountant regarding the potential or actual investment. Information from third parties, which were considered as reliable, were not verified. A liability for information from third parties will not be adopted, unless the deficit in the information of third parties was clearly visible: in such case any liability will be excluded except for gross negligence and will ful misconduct.No reliance may be placed for any purposes whatsoever on the information contained in this document or on its completeness, accuracy or fairness. No representation or warranty, express or implied, is given by or on behalf of the Company, its directors, officers or employees or any other person as to the accuracy or completeness of the information or opinions contained in this document and no liability whatsoever is accepted by the Company, its members, directors, officers or employees nor any other person for any loss howsoever arising, directly or indirectly, from any use of such information or opinions or otherwise arising in connection therewith, unless the circumstances, which cause a potential liability , were deliberated or grossly negligent caused by the aforementioned persons and which stand in a causal connection to the potential damage.This document, its contents, any discussions at this meeting or otherwise made available (whether orally or in writing) in connection with the Transaction and/or Company, is being provided to you solely for information and is being given on the basis that the recipients keep confidential all such information. This document is confidential and may not be – in any way –reproduced, redistributed or passed on, directly or indirectly, to any other person or published, in whole or in part, for any purpose. The products mentioned herein and the Transaction are typically not admitted for public distribution in the country, in which this presentation is held, and may only be distributed in any potential private placement exceptions. Therefore, the content of this document is only directed to persons, who deal with such transactions within their respective professional business and who do not have a private interest regarding the Transaction or the products (thereinafter referred to as “relevant persons”). Any investment or investment activity to which this document relates is available only to relevant persons and will be engaged in only with relevant persons. Any recipient of this document who is not a relevant person should return it immediately, not attend any potential presentation and may not take any other action (in particular no investment in the Transaction).
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Disclaimer
Page 17 | CORESTATE Capital Holding S.A.
CORESTATE Capital Holding S.A. CORESTATE Capital Group4, rue Jean Monnet | L-2180 Luxembourgcorestate-capital.com