Domicil builds on mandates to plan own housing investment
The Munich-based Domicil Real Estate Group remains very positive about German residential housing, and is gearing itself up to take on further mandates, after jumping up a couple of divisions with some sizeable deals earlier on this year.
Domicil was hired by Danish pension fund PFA several months ago to exclusively manage the Century residential portfolio which PFA had just bought in August for more than €1bn from Industria Wohnen. The deal was PFA’s largest-ever transaction, and came after the Danes took a recent strategic decision to “significantly increase” the fund’s exposure to real estate through 2022, a period which the fund said is likely to see interest rates remain at about the same low level as they are now.
The Century portfolio consisted of 3,700 homes across Germany, with a total of 247,300 sqm of lettable space in a commercial building and 33 separate residential building across 15 locations in Germany. Two-thirds of the 3,700 residential units are in major metropolitan centres, including Berlin, Munich, Hamburg, the Rhineland and the Rhine-Neckar region.
More than half of the rental income is generated in Berlin and Munich. The Bavarian capital, in particular, is thought to offer much upside potential with average rents in the city now nearly €10.00 per sqm, well above the Century portfolio’s current average.
Domicil also manages the targeted €200m fund for the growing residential assets of Wealthcap, part of landesbank BayernLB, who in August absorbed a starter package of eight properties across Germany worth €86m. It also has a selective acquisitions partnership with listed housing firm LEG Immobilien based in North Rhine-Westfalia.
Domicil Real Estate Group was founded in 2009 by Khaled Kaissar, still the owner and senior partner, and originally invested on its own account in German housing.
REFIRE met with Domicil’s managing director Andre Schmoeller recently to learn more about the company. "It started as an investment company, taking assets on book - mainly residential at first - and privatising via single sales, or converting buildings to condominiums and selling individual apartments," said Schmöller.
The company acquired the heterogeneous Alpha and Beta portfolios in 2016 with a partner, and has been beefing up its investment and asset management staff since then to handle the growing number of properties and site locations in its portfolio. Part of the portfolio has since been sold to Wealthcap.
The pattern is reminiscent of the privatization strategy developed by erstwhile minnow Patrizia AG, now a giant fund group, in the neighbouring city of Augsburg. Indeed, Schmoeller himself worked for many years at Patrizia, and Domicil management includes several Patrizia alumni, well versed in the skills of property management and asset management to control the property manager, which big domestic and foreign investors are unable to handle on their own. “At Domicil we concentrate when buying on locations with rental and price appreciation potential in popular cities. We see development potential particularly in the less well-known microlocations where we can
With the Danish PFA, for example, Domicil is expecting a further rollout of €300m to €500m over the next couple of years in residential investment, with the PFA portfolio being viewed as a real ‘buy-and-hold’ mandate. Domicil itself plans its own development in addition to existing properties, and is near to closing on two new projects in southern Germany, possibly before the end of the year.