Optimum and Blackstone team up in JV to deepen German investment

Luxembourg-headquartered private equity investment group Optimum Asset Management and global alternative investment manager Blackstone have combined in a new joint venture to buy a 30-asset real estate portfolio in Germany, valued at about €800m.

The portfolio was established by Optimum as a fund, the Optimum Evolution Fund SIF – Property II fund, ten years ago in 2011, in which Blackstone had previously invested in 2018 through its Strategic Partners secondaries business, alongside investors such as Helaba Invest, Neuberger Berman and other big partners. However, the new joint venture is a special set-up involving Blackstone's direct real estate arm.

The fund holds residential and commercial properties across Berlin, including landmark office schemes.

Earlier investors in the fund are being granted the option of exiting or staying in the fund, which would mean diversifying their investment further as Blackstone and Optimum are both planning to inject more capital into the fund. Optimum said it had explored a number of options to provide liquidity to investors in the fund, and the new joint venture offered the best solution.

According to Alberto Matta, founder and managing partner of Optimum: "We have seen attractive returns from this high-quality portfolio since its creation, which is testament to the strength of the German real estate market and the expertise of our team... We firmly believe in the continued prospects of this portfolio, which was built using our granular approach. We place particular emphasis on sourcing the right assets and managing them correctly. The commitment from Blackstone is an endorsement of the German real estate market, this portfolio and Optimum."

James Seppala, Blackstone's head of real estate for Europe, said: “We recognise Optimum’s ability to identify unrealised potential in real estate assets, undertake value-enhancing management initiatives, and to ultimately create sizeable, high-quality real estate portfolios. Combining this with Blackstone’s scale and resources will provide our collective investors with a unique opportunity in and exposure to the German real estate market.”

Earlier last month Optimum Asset Management bought a 15,000 sqm office asset in Berlin-Pankow, the first acquisition for its German Real Estate Fund IV (GREF IV), which has a strategy to invest in a diversified portfolio of residential and commercial properties.

The GREF IV fund is the fourth fund in a series of Optimum real estate funds focusing on properties in the €10-40 million range. With a target volume of €300m, the fund is looking to invest in mis-priced and mis-managed residential and commercial assets near major infrastructure and employment hubs. The primary target area is Berlin, with selected investments in high-growth, supply-constrained cities such as Hamburg, Dresden, Leipzig, Cologne and Düsseldorf.

Matta commented on the fourth fund's objectives: '"We are well placed to further consolidate our strong track record of identifying well-located, high-quality, and mismanaged assets and invest with agility below the radar of larger managers. Germany’s real estate market continues to offer strong opportunities to create value. With the lowest office vacancy among the big seven German cities, Berlin remains one of the most sought-after locations in Europe for office investment, driven by a fast-growing economy, positive demographics and employment growth, and a robust tech and start-up community.”

Optimum, with more than $1.8bn of assets under management, has offices in Berlin and Hamburg, as well as in London and the USA. Since 2006, the company has completed more than €1.5bn of transactions in Germany. Its track record in Germany includes Property I, the Berlin-focused real estate fund, which was fully realised in 2014, achieving an IRR of 19% and a 2.3x MOIC.

The group's Property II (2011 vintage) and Property III (2014 vintage) are centred on Berlin and Potsdam, with additional properties in Dresden forming part of the Property III portfolio. Property II and Property III currently have a total return of around 290% and 170% since inception, respectively. Realised assets have achieved an IRR ranging from mid-teen to 30+%.