Wertgrund adds residential, opens new offices

Munich-based residential property investor and asset manager Wertgrund Immobilien AG has further invested in German residential, primarily in northern German cities. The investments will see the company opening up two further regional offices, in Kiel and Braunschweig, to support the new holdings.

Wertgrund most recently bought 1098 apartments and 48 commercial units for about €90m. The largest bloc included 585 units from Swedish residential investor Akelius, located in Kiel, Lüneburg and Buchholz. A further 350 units from several different sellers are in Braunschweig and Gütersloh, both new locations for assets assigned to Wertgrund's Wohnen D fund, which now holds 1,900 units valued at about €150m.

REFIRE recently met with Thomas Meyer, Wertgrund's CEO, to catch up on the company's current activities. Wertgrund remains focused on second-hand German residential property, seeking value-added potential in secondary cities. Preferred are university cities with healthy demographics.

Meyer says, "Many mid-sized German cities still offer excellent investment potential. We keep a close eye on these cities and scrutinise them constantly for their demographic and economic development, as well as their risk-return potential."

The company's approach is management-intensive, looking to upgrade assets through refurbishment and energy-saving investment, which also helps to avoid many restrictions imposed by the Mietpreisbremse or rental cap widely in effect. 

At €1,200 and upwards per sqm, the company tries to avoid competing with several of its more aggressive listed rivals who are looking at lower prices to add to their residential holdings. Preferred size is between 350 and 500 units, or between €4m and €40m, buying at a 15-17 times multiple.

The company buys to hold for the long term (10 to 15 years) when buying for its own account or for its funds, which are targeted at German institutions and private investors. Its time horizon is shorter (more like 5 to 7 years) when co-investing with such partners as Pramerica and Benson Elliot, the latter with whom it bought many of the old Deutsche Speymill assets.

Wertgrund has been operating a system of Cash-Stops and Cash-Calls to investors over the past five years, which lowers liquidity and hence boosts performance in its funds. It works like sort of 'just-in-time' financing where it identifies the asset first and then calls in the money to pay for it. As soon as enough has been raised, it issues a Cash-Stop to turn off the tap.