ActivumSG Capital acquires fairvesta Group

Jersey-based investment group Activum SG Capital (ASG) has taken over Germany’s fairvesta Group from the Knoll family via its acquisition of a German office and retail portfolio valued at around €800m. Both parties have agreed not to disclose the purchase price.

ActivumSG Fund V has acquired fairvesta’s business headquarters in Tübingen, southwest Germany, from the Knoll family, who founded the company in 2002. Fairvesta currently manages 14 real estate funds on behalf of about 18,000 private European investors. The portfolio contains around 150 assets, largely comprising office and retail buildings in German cities.

‘The acquisition of fairvesta highlights how we find new ways of accessing attractive investment opportunities,’ said Saul Goldstein, Activum’s founder and managing partner and a former manager at private equity group Cerberus. ‘Corporate acquisitions are a feature of ASG funds, giving our investors exposure to sectors in great demand while avoiding the asset price inflation of competitive direct investment markets,’ he added.

Acquiring fairvesta was a no-brainer because Activum is drawn to ‘complex situations’, Goldstein told REFIRE: ‘What we liked about fairvesta is that it had a decent size asset base and we saw an opportunity to bring our value-add approach to it.’

For now, fairvesta will be placed into ActivumSG Fund V, Goldstein said. ‘Most of our investments are held for four-to-five years but for something like this, it could be for longer.’

In addition, Fund V, like Activum’s predecessor funds, also has the remit to provide mezzanine and stretch mezzanine financing, which can account for between 15% and 20% of all of Activum’s funds. ‘We can complete a loan in two weeks,’ said Goldstein. ‘We like it to have an office or resi redevelopment component. Being able to process loans fast is how we compete.’

Fairvesta’s attraction is likely to have been that it has typically invested ‘ahead of the curve’, one analyst, who asked not to be identified, told REFIRE: ‘Fairvesta has a good track record of buying assets out of insolvency or non-performing loans and turning them around,’ he said. ‘Actually, Fairvesta was already doing this back in 2009/2010 when most investors wouldn’t even have considered it. It’s good at sourcing equity and has a good track record. Everyone is looking for a platform deal, so it’s easy to see the appeal.’

However, it’s very difficult to estimate just how much Activum may have paid for the Tübingen-based firm, the analyst added. ‘Private equity deals like this can vary so much,’ he emphasized. Sometimes, a firm might acquire a rival for 5 to 6 times EBITDA. Other times, it could be as much as 8 to 10 times EBITDA.’ (Activum does not publically disclose its financial results.)

Activum’s predecessor funds have made three other corporate investments in Germany, creating Instone Real Estate by combining formart and GRK, two acquired residential developers. Also, Activum SG Fund III acquired Wi-Immo Group, Germany's largest specialist developer of senior housing, in September 2016. Activum said at the time that it paid less than €50m.

Value-add offices are also a draw: ‘We like value-add offices in Germany,’ Goldstein said. ‘We’d also like to grow our senior housing platform. We’ll go outside the ‘Big 7’. For example, we have a big residential presence in Leipzig and also did a value-add office deal there.’

Activum’s founder Otmar Knoll has resigned from fairvesta following the sale. However, his firm will continue to operate with its own management team.

According to Richard Wartenberg, head of real estate at ActivumSG Advisory, his firm now ‘wants to take fairvesta to the next level’: ‘We bring an institutional approach and asset management expertise from handling larger and more complex transactions,’ he said. ‘This will lift fund performance and allow fairvesta to offer attractive investment products in the German real estate market to its customers, ensuring the company continues on its growth path.’

The acquisition of fairvesta marks the eleventh investment on the part of ActivumSG Fund V. The fund’s other investments include mezzanine financing for various developments in Berlin as well as residential development and land purchases in Spain.

Other geographical market could also be on the cards, according to Goldstein. ‘We’re sniffing around but we haven’t identified a new market yet, one which would allow us to put a big enough team on the ground to become a market leader. We are on the lookout for new geographical markets, though.’

Deloitte, Noerr, Tortell Smeets & Lange, Rothschild and Savills advised Activum. Fairvesta was advised by Ernst & Young and TREC Real Estate Consulting. ASG currently has five discretionary closed-end real estate funds under management with a combined initial equity commitment of €1.5b.