Credit Suisse planning big boost in German investment

German trade publication Immobilien Zeitung carried an interesting interview recently with the head of real estate investment at Swiss bank Credit Suisse, Daniel Tochtermann-Pedio. The bank had earlier made it clear that it planned considerable new investment into the German market for its Swiss investors, particularly into value-added commercial real estate, despite the fact that its CS Euroreal open-ended fund is one of those currently in liquidation.

Mr. Tochtermann-Pedio said that Credit Suisse has €2.8bn of German real estate under management, after disposing of €150m last year and buying for €20m – but that this year his bank expects to be both a much bigger buyer and a seller.

“Germany is not cheap, not even for the Swiss. But it’s also not overpriced, apart from certain core properties in top locations, where the prices are comparable to Switzerland. It also has the benefit of being highly diversified. This makes Germany extremely interesting for us, with its strong economy, comparatively stable yields, and a large real estate market that’s not limited just to its Big Seven cities of Berlin, Düsseldorf, Frankfurt, Hamburg, Cologne, Munich and Stuttgart. Among the numerous mid-sized cities that are very interesting are Augsburg, Wiesbaden, Mainz, Freiburg, Leipzig and Hanover, to name just a few.”

“We’ve got a really good team in Frankfurt who are well anchored locally and have plenty of experience in more than 40 German cities. We’re not obsessed with pure Core properties, we’ll be competing for off-market deals, and we’re quite prepared to take a few measured risks on lease contract durations and occupancy rates. Our experience in secondary locations will stand to us, albeit focusing in those cities only on the very best locations, and we’ll get involved in project developments by both forward funding and forward purchasing.” The bank will not be setting up debt financing funds, he confirmed.

European investors valuing security have little alternative to Germany at the moment, he believes, “apart from the Nordic countries but their markets are very small.” In terms of yield expectations, Swiss investors expect a total return of 4%-6% p.a. for core and core plus assets, with an annual dividend between 3%-4%, he said. A value-add fund should offer a total yield of 8% and a dividend between 2%-4%.

While Tochtermann-Pedio is busy planning his acquisition campaign, his colleagues over at the bank’s CS Euroreal open-ended fund are busy liquidating their erstwhile vehicle, with a deadline for full liquidation of April 2017. The fund recently sold off a package of six assets in Sweden, France, Germany and UK for a total of €315m – about 6.5% below their last assessed value. In liquidation since May 2012, the portfolio still contains around 90 assets across 46 locations in 11 countries, encompassing a total asset value of €4.5bn.