The global residential specialist fund manager Greystar has been ramping up its activities in Europe for the past several years, particularly in student housing. Now, with new innovations and processes to better micro-manage many new forms of housing, the company is clearly accelerating its drive to gain more access to the sector in Germany as well, after a period of relative quiet.
© Greystar
Jan-Felipe Salzmann, Senior Director of Investment in Germany, Greystar
REFIRE met with Jan-Felipe Salzmann recently to catch up on latest developments at the company. Salzmann arrived recently from Goldman Sachs to head up Greystar's expanding business in Germany and Austria, bringing a wealth of experience from Goldman's own European real estate operations.
It's clear that Greystar has been thinking a lot about new forms of living in its individual markets since REFIRE's last in-depth talk with the company some years ago. Then, Greystar was looking carefully at options in Germany, but there was little transaction activity. Now it's evident that the company is being propelled by a whole different dynamic.
As we reported in a recent REFIRE issue (#228), Greystar is now building on the undeniably strong fundamentals for 'living' real estate - particularly micro-living and student accomodation. New innovations such as serial building and modular housing, and new AI-driven applications to manage large numbers of apartment units are lending new impetus to the sector. Salzmann underlined how these trends were now underpinning Greystar's renewed drive to create new housing in Germany, despite the obvious hurdles that have been strangling numerous developers recently.
€1.55bn raised for new fund targeting residential housing in Europe
Last year the South Carolina-headquartered Greystar raised €1.55bn for a new fund targeting residential housing in Europe, well ahead of the original €1bn it had been seeking. At the time, Mark Allnutt, Greystar's head of Europe, said: “Residential has historically been the best inflation hedge of all commercial real estate, because of the duration of lease." With shorter leases, reviewed annually, they track inflation more closely than commercial property, a big advantage for the landlord. Allnutt said he expects rents would at least keep pace with inflation in the company's key European markets, because “there is chronic undersupply of housing across all our markets”.
Against this background, Salzmann described the mechanics of a recent notable deal done by Greystar as part of its "Develop to Core" strategy for Germany and Austria. Greystar is buying the prominent "Greenpark" residential project in Berlin-Neukölln in a forward purchase deal, and will build out 758 one-, two- and three-bedroom apartments over 30,000 sqm.
There will also be 1,452 sqm of communal space, including a fitness and yoga studio, a cinema and a roof terrace. There will also be a children's playground, a padel court and a basketball court. Both outdoor and underground car parking spaces are planned for residents. The project is scheduled for completion in summer 2026 and is being realised by BAUWENS.
It is Greystar's largest German project to date, and fits Greystar's profile of the kind of revitalisation opportunity to create a new community in a popular neighbourhood. The location has been drawing new residents due to its proximity to the popular Tempelhofer Feld, Britzer Garden and the nearby Teltow canal, whose amenities are being successively upgraded.
Clemens Stahr, the managing partner at BAUWENS, explained why the deal was attractive. "We now have the chance to successfully continue the previous landowner's ten-year endeavour to develop the site (A Dr. Höcherl bought the site from the city of Berlin, and prepped the development for construction).
"Finding a strong and high-quality buyer like Greystar for this exceptional development in Berlin is a great success in this day and age. The city of Berlin is facing a shortage of rental flats more than ever and we are confident that large-scale developments like Greenpark will help to reduce it." The district of Neu-Kölln is an ethnic and cultural melting-pot, with 330,000 residents from 160 nations and a population growth of 6.8 % in the last 10 years.
Repricing creating many new residential opportunities
Also talking about the Greystar strategy on the sidelines of the recent MIPIM fair in Cannes was Greystar's Head of Europe, Mark Allnutt. "The market has been and continues to reprice and, where investors were extending and pretending, there are now more people willing to sell in order to reallocate the capital", he said.
"Towards the back end of last year we saw repricing in France and Germany that makes us believe that in the next 12-24 months, we'll be making a lot more investments into those countries," he added.
Greystar, which has about €16 billion of assets under management in Europe, made €1.4 billion of property purchases in the region last year. It said it expects to exceed that in 2024, with apartments and student housing "top of the charts for capital allocation right now", according to Allnutt. The company is also active in the UK, Ireland and Spain, and shortly, Austria.
At the time of the €1.55bn fundraising for Europe last year, more than the company had originally been seeking, REFIRE quoted Allnutt as saying: “Residential has historically been the best inflation hedge of all commercial real estate, because of the duration of lease." With shorter leases, reviewed annually, they track inflation more closely than commercial property, a big advantage for the landlord. Allnutt said he expects rents would at least keep pace with inflation in the company's key European markets, because “there is chronic undersupply of housing across all our markets”.
CEO Bob Faith highlights Germany's problems
Towards the end of last year, in a Bloomberg TV interview, the overall founder and CEO of the Charleston-headquartered Greystar, Bob Faith, talked about opportunities for private equity firms with capital to invest, particularly in his field - focused in the US and Europe on housing frequently of interest to young professionals and students.
Faith said that while interest rates have caused chaos in residential real estate markets across Europe, nowhere is the wave of distress more evident than in Germany. “Germany is probably the most distressed in Europe right now, we are very closely looking through some interesting situations. I think there will be some investors that took too much debt when it was cheap.”
"And when it was cheap, German residential prices soared and rental yields shrunk to record lows. Developers leveraged aggressively, while German banks often extended senior loans for up to 80% of a property's value. But what we're seeing now are developers filing for insolvency, landlords taking write-downs, and lenders bracing for loan losses.
The shifting interest rate environment meant that many developers have paused or halted construction, worsening likely future housing shortages and inevitably pushing up rents, said Faith. Institutional investors can see that, and are now very keen to allocate more capital to residential investment.
Now, with rising bond yields, investors are adjusting their return expectations, while real estate prices are falling. Faith said of Greystar's strategy, “We are fortunate, we are a lower leverage investor and we have longer time frame to move through. Actually often, times of distress are our times of greatest growth.”
REFIRE: Greystar is clearly laying the groundwork for further residential investment ahead. It has been rolling out its in-house student housing brand Canvas which it launched in 2022 and which operates properties in France, Germany, Netherlands and the UK. Its German 'Canvas' properties are in Frankfurt-Niederrad and Hamburg-Harburg, and incorporate furnished apartments along with residential services such as common areas and a dedicated on-site team, with other facilities beloved of mobile young professionals, couples and students, such as co-working spaces and bike storage.
In France the company recently added a 650-bed student residence in the Paris suburbs, a conversion from an office building like its property in Frankfurt-Niederrad. It now operates 62,000 student accomodation units in Europe.
It is currently rebuilding its portfolio in Spain after selling RESA, its Spanish student housing business which it owned with AXA IM Alts and CBRE Investment management to Dutch investor PGGM's Infrastructure Fund for €900m. Two years ago it teamed up with Singaporean sovereign wealth fund GIC to buy UK student housing portfolio Student Roost for about €3.3bn in what was the largest UK property transaction in two years. With residential property prices falling all across Europe's undersupplied housing markets, there should still be abundant opportunities for focused companies with adequate firepower, like Greystar.