TAG Immobilien ‘on track' to acquire 4,500 resi units in Germany this year

German residential investor TAG Immobilien is on track to acquire almost 4,500 units this year, according to the group’s CFO, Martin Thiel.

‘This year, we have already acquired 1,400 units and I think we'll be able to acquire an additional 3,000 units,’ Thiel said. ‘We'd like to invest around €150 mln this year and, ideally, we like to buy portfolios that are as big as possible.’

In February, TAG Immobilien acquired 1,440 units equating to 73,300 sqm in Brandenburg for €41.9m. The portfolio generates net rental income of around €3.42m and has a vacancy rate of 19.3%. The deal is expected to close at the end of the second quarter of 2017. In November and December last year, the group acquired residential portfolios comprising 1,651 residential units in Thuringia, Saxony-Anhalt and North Rhine-Westphalia for €63.6m.

It now holds 80,000 units which is no small feat given that its portfolio totaled just 4,000 units in 2010. Between 2010 and 2012, it went on a major acquisition drive to grow its portfolio to 70,000 units.

Unlike some residential investors who focus exclusively on city centre units in Germany’s ‘Big 7’, TAG Immobilien is focusing on ‘B’ locations, Thiel said, which includes the outskirts of Berlin.

‘These areas may have lower growth prospects and higher vacancy rates but that is reflected in the purchase price,’ he said. ‘For example, residential properties in the centre of Berlin typically generate a gross yield of 3%, compared to an 8% yield outside the city centre – as such, the return is 500 bps higher.’

Today, 70% of the group’s portfolio is in former East Germany. In addition to Berlin, it is especially interested in cities such as Leipzig, Rostock, Jena and Freiberg. ‘Due to our local presence and local contacts, we have the advantage in many transactions of being approached at an early stage or possibly even exclusively. We are also interested in portfolios that include a larger number of locations in East Germany, as we are very broadly positioned here. The majority of our competitors does not have this broad geographic footprint and therefore needs to focus on individual cities,’ Thiel said.

Although the group is focusing on East Germany, it actually holds the most assets in Salzgitter in western Germany, following TAG Immobilien’s acquisition of a 24% stake in rival Colonia Real Estate in February 2011. The Salzgitter portfolio comprised around 8,800 units. ‘When we took on the portfolio, the vacancy rate was 25%. By 2015, we had brought it down to 7.5%,’ Thiel said,

Due to the size of its portfolio, TAG Immobilien can afford to be disciplined, according to Thiel. ‘We don't have to buy properties for the sake of it. It can be challenging to find enough to invest in and our business model is hard work. Regulation is probably our biggest challenge but the Mietpreisbremse doesn't affect us much as we're not seeking to put rents up by more than 10%.’

TAG Immobilien had €4b of AUM as of end-March 2027.