For some years now, several major German portfolio holders of residential real estate have been listed on the stock market – including companies like Deutsche Wohnen and TAG, as well as more recently Gagfah, GSW, LEG NRW, and Deutsche Annington. In addition, there are numerous smaller listed real estate companies that are in the process of expanding their portfolios, cases in point being Westgrund, Estavis and others like them. And then there are major players such as Patrizia whose assets consist to a large extent of residential property, but who are simultaneously active in the office and retail segments.
At the moment, a significant segment of indirect real estate investments is forming within the residential real estate segment that complements the formerly dominant open-ended and closed-end property funds. They are favoured mainly by foreign investors to whom the vehicle of the German Spezialfonds is alien, and who prefer to invest in listed companies instead.
German and international investors are currently committing themselves in German residential and retail real estate above all. The number of listed companies in the retail real estate sector, however, is much, much lower. One example would be Deutsche Euroshop, which owing to the sound management by ECE has counted among Germany’s most stable listed real estate companies for years. Unlike most other listed German companies, it has an extensive track-record of comparatively low-level volatility and stable dividend payments. Another such company with a focus on retail real estate is Hahn Group, which is one of the leading German fund and asset managers in the field today. Yet aside from Deutsche Euroshop, few retail property portfolio holders have come forth with an IPO, although it is hard to see why this should be so. In contradistinction to residential stock, to which the vehicle of REIT is barred in Germany, nothing stands in the way of launching a retail property REIT.
I, for one, predict a great future for listed real estate companies, which for many years have eked out a bleak wallflower existence in Germany. Indeed, I expect to see public offerings of retail real estate specialists along with the anticipated IPOs of residential portfolio holders. It is high time we had some retail REITs on the German stock market.
It is also time for a mental shift among institutional investors in Germany, which so far have steered clear of listed vehicles. Historically speaking, their reticence may have been justified by the sobering performance of many listed real estate companies in Germany. But even German insurance companies are well advised to exploit the opportunities of real estate stock more than they used to. This may admittedly take a while yet. For the time being, such stock remains the vehicle of choice for foreign investors who take an interest in the German real estate market.
