KGAL tops €1.5bn in European deals, with record new leases

The Munich-based investment and asset manager KGAL Group said it had achieved a record year in real estate investment in 2017, carrying out €1.5bn of European real estate transactions and closing almost 107,000 sqm of new leases last year.

According to André Zücker, managing director for real estate at KGAL: "In a challenging market environment and amid fierce competition, our real estate business performance was once again top class. Together with our investors, we continued to implement successful international real estate strategies."

KGAL's investment portfolio in Germany increased through the acquisition of several office and retail properties, in Munich and the wider areas of Nuremberg and Stuttgart. Outside Germany, there were large-volume transactions in Budapest, Paris, Vienna, and Wiener Neustadt.

These transactions contributed to a total of over €730m of acquisitions for the real estate business. At the same time, divestments and changes of ownership of a further €790m were completed, resulting in an accumulated transaction volume of over €1.5bn in 2017.

Although the record figure achieved in 2016 (€2.1bn due to one-off special items) was not reached, the 2017 volume – from transactions inside and outside Germany – is a positive sign for future growth, Zücker commented. KGAL's real estate portfolio at end-December 2017 was valued at €6.9bn.

On leases, KGAL again exceeded the previous year’s record in closing new leases, letting 106,800 sqm of space in 2017. This has passed the 100,000 sqm mark for the first time and represents an increase of 8% on 2016 (98,900 sqm).

Of 2017 leases, 88,500 sqm or 83% of new leases, was attributable to commercial floor space outside Germany, predominantly in Austria and Hungary. A total of around 18,300 sqm came from a high number of smaller rental transactions in Germany. The total floor area for assets under management now comprises over 1.35 million sqm. KGAL's average tenancy rate in real estate is now almost identical both inside and outside Germany, at 98.5%.

The KGAL Group currently has €22.7bn of assets under management, with its investment focusing on long-term capital investments for institutional investors in the real estate, infrastructure and aviation asset classes. The group, founded 50 years ago in 1968, operates across Europe and has its registered office in Grünwald near Munich.

REFIRE: For its investment strategy in real estate, KGAL recently produced a white paper on the rationale behind Walkability, a concept the company is championing for office properties. It deals largely with Millenials', or Generation Y's approach to their working environment, which can prove to be a decisive factor in an employer's ability to hire them. Millenials’ approach to work - as frequently an extension of their out-of- work lifestyle - means that proximity to gymns, cafes, and other places to meet friends and colleagues are crucial to their choice of workplace.

This has given rise to the concept of “Walkability”, which in key metropolitan office markets can itself be a key driver of real estate performance.

The paper offers comprehensive research into what helps qualify certain properties for the category, what attracts footfall by giving the pedestrian the feeling of security and comfort, and provides interesting scenes for humans to visually and sensually consume. It’s well worth reading. The White Paper can be downloaded at: https://www.kgal-investment-management.com/real_estate