All change at CORESTATE as new acquisitions see size surge

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Luxembourg-headquartered investment manager CORESTATE Capital Holding is setting up an open-ended Spezialfonds focused on German residential property, with a target volume of at least €300m. An initial €70m equity for the seed portfolio has already been raised from a german pension funds.

CORESTATE's recent acquisition Hannover Leasing Investment GmbH has been mandated as the investment management company for the Corestate Residential Fund II, which will focus on newly-built residential property in larger German cities and is aiming for an annual payout of at least 4%. Property management will be handled by Capera Immobilien Service GmbH, a CORESTATE subsidiary.

According to Thomas Landschreiber, CIO and co-founder (with Ralph Winter) of CORESTATE, "The increase in demand from institutional investors since CORESTATE's listing in autumn 2016 is remarkable. Due to our strong network and asset sourcing capabilities we have top quality assets worth several billion euros in our pipeline, which secures us an excellent advantage over our competitors. Residential real estate represents one of our strongest asset classes." The company has also been investing in student housing (where it was a very earlier pioneer on the German market) and micro-apartments.

CORESTATE, listed on the Frankfurt Stock Exchange, has 470 staff across 29 offices. Last month it bought the Swiss group HFS Helvetic Financial Services for a figure described as "in the mid three-digit million range", financing the acquisition by issuing 7.4m new shares (valued at about €350m), as well as from debt capital and its own funds.

The company has been transforming itself over the past couple of years, and this latest acquisition gives it the chance to fully integrate Hannover Leasing into its newly-expanded business model. Helvetic Financial mainly provides mezzanine financing for German residential and commercial real estate, along with sub-advising numerous funds. It launched its first mezzanine fund back in 2009. Hannover Leasing (HL) is a well-established 35-year-old asset manager and initiator of closed-end mutual AIFs.

Bringing the two businesses together under CORESTATE will give the parent company €20bn of assets under management, and give it the expertise to become a leading investment manager with a focus on real estate equity, debt and alternative assets in German-speaking Europe. Ralph Winter, founder and senior advisor of CORESTATE, said the company should benefit from an extended product offering, imporved access to capital, and higher recurring revenues. "CORESTATE will continue to drive the consolidation since both the need and potential in our industry are significant. The newly increased and diversified CORESTATE offers an excellent platform for additional well-chosen acquisitions," he said.

Investors seem to like the idea. The share price has soared, nearly tripling from its somewhat unsteady IPO last year, after an earlier cancellation due to "unfavourable market circumstances" at the time.

Its new size and ambitions mean CORESTATE has revised all future forecasts for the business, raising its guidance for the ongoing 2017 financial year from €36-37m to €85-90m. It says its revenue basis will become broader and more stable, with 90% of revenues recurring in nature.