New drive by Commerz Real to attract institutionals

REFIRE met recently with Commerz Real, the Wiesbaden-based real estate fund subsidiary of Commerzbank, to catch up and get an idea of where the company sees opportunities in 2018. Our clear take-home message was the company's new focus on digitalisation and the expansion of its institutional business, in both real estate and equipment leasing.

Since then the company has published a comprehensive statement on the performance of all its business divisions in 2017. Purchase volume increased by more than 30% to €1.8bn, with most of this being in real estate. The company's Hausinvest fund grew to €13bn, with net cash inflows of €1.2bn bringing it up from the previous year's €11.8bn, and accounted for more than half of the group's purchases and sales.

Key transactions included buying the Pacific Beach Hotel in Honolulu for €$500m and the sale of the Japan Centre in Frankfurt am Main for €280m, making it one of the largest German deals of 2017. This followed a year of several strong new lease signings in the Japan Tower, including the European Central Bank for 17,8000 sqm.

(A further recent disposal, albeit in 2018 rather than last year, was Commerz Real's Hausinvest sale of the Machtlfinger Höfe office complex in Munich to Frankfurt-based Conren Land. After several major clients had left in 2009 and 2010, Commerz Real repositioned the property, subsequently letting it in full to 18 new companies including big tenants such as Creditreform, NFON and Zechbau. This boosted the market value of the asset by 60%, giving it a market value of €83.9m at end-September 2017. The sale price to Conren was not disclosed.)

In 2016 the company had largely been engaged in cleaning up its portfolio, with disposals of €2.7bn, twice as high as its acquisitions of €1.4bn. Last year (2017) disposals added up to €1.4bn.

In real estate management, Commerz Real also posted good growth, leasing 351,000 sqm across all product classes and increasing the number of leases year-on-year from 738 to 836. This brought Hausinvest's leasing ratio up to 95% by the end of the year, up 1.9% on the period. The fund's overall performance was 2.7% at year-end, up from 2.3% in 2016.

There is a renewed drive to develop institutional business, with the launch last year of three special funds for professional and semi-professional investors in the segments Hotel, Smart Living and Renewable Energies. This has seen Commerz Real buying several wind farms, student and micro-apartment complexes and hotels for more than €330m, including individual financing for companies. CEO Andreas Muschter said, “We assume that this result will be at least doubled in the current business year.”

As we report elsewhere in this issue, Commerz Real is targeting investment in 2018 of €2bn for its new CR Institutional Hotel Fund, and has kicked off its programme by buying two hotels in Brisbane, Australia, from the Ibis and Mercure brands for about €50m. The seller is CDL Hospitality Trusts of Singapore. Both hotels will be operated by a subsidiary of the Accor Group.

The hotel fund is targeting an annual return of 6% for professional and semi-professional investors. According to Commerz Real board member Johannes Anschott, "Hotel real estate – especially in top locations – has become even more in demand because of its attractive risk-return profile."