Russian investors eyeing German real estate after Brexit uncertainty

Berlin law firm Bottermann Khorrami was recently involved in the structuring of €25m of real estate bonds issuedby a German project developer, who plans to use the capital to buy and upgrade value-added residential real estate throughout Germany.

The real estate properties are located in German B- and C-cities such as Duisburg, Mainz and Minden, while the bond investors are predominantly from Russia, the Baltic states and to a lesser extent from Ireland.

According to partner Esfandiar Khorrami, Russian investors are taking an increasingly positive view of the German real estate market. “Brexit has resulted in Russian investors turning away from the previously popular UK market. Given the uncertainty of the British market combined with its extremely volatile currency and the political risks, German real estate is now more appealing to Russian investors. ”He added that “the reluctance of the British government to take concrete steps to trigger a departure from the EU and the ensuing lack of clarity is having a strong negative impact on investments by foreign investors in the UK”.

“Foreign investors have been limiting themselves to A cities for a long time. They are now breaking out and are investing in B and C cities as well. Properties can also be bought for 12 or 13 times the annual rent in these locations at present,” continued Khorrami. “We are also seeing foreign investors accepting higher risks. They are not just restricting themselves to buying existing properties, but are also prepared to take on development risks."