TLG Immobilien AG
Barak Bar-Hen - TLG Immobilien
New CEO of TLG Immobilien, Barak Bar-Hen, said of the revaluations, “This increase in values reflects the strong dynamic on the Berlin office market and is a result of our strategic focus on further investing in our holdings."
Listed Berlin commercial property investor TLG Immobilien booked a €400m upward revalutation of its property asset in the first half year, bringing its assets under management to €4.6bn. The revaluation derived largely from its Berlin properties and project developments, against a background of a shortage of office space in the city, which has seen rents rising sharply.
New CEO of TLG Immobilien, Barak Bar-Hen, said of the revaluations, “This increase in values reflects the strong dynamic on the Berlin office market and is a result of our strategic focus on further investing in our holdings. It is our goal to generate even more value through our asset management and our strength on the capital markets.”
His CFO Gerald Klinck added, “The valuation growth of €400m is largely due to our being able to increase our pro-forma EPRA NAV by about 18% compared to last year, and as a result lowering our overall indebtedness to under 30%. This gives us more financial room to maneuver for future growth through acquisitions and investment.”
The company hasn’t wasted time under Bar-Hen in also raising fresh capital for its ambitious expansion plans. It issued 8.5m new share at €26.13 from institutional investors, raising €222m. This followed a previous capital raising in May, which brought in €600m. Its largest shareholder, the Israeli group Ouram, had 29.3% of the company before the latest fundraising, and it’s not immediately clear if this pushes it above the 30% level, which would require it to make a formal takeover offer for the company.
The S-Dax listed TLG Immobilien owns and manages commercial properties mainly in Berlin, Dresden, Leipzig, Rostock and Frankfurt am Main. Many of its lease agreements have short WALTs, giving it potential to raise rents. It also has a high degree of its properties in good locations in the eastern part of Berlin, with many in need of modernization or complete replacement, at higher valuations. In addition to offices, it owns urban retail parks anchored by grocery stores, and has seven downtown hotels
Peak Berlin office rents have been rising steadily, along with declining vacancy rates, underpinning the TLG upward revaluation. In Q2 2019 peak rents in the capital city rose by 4.4% to €33.50 per sqm and could rise further to €37.00 per sqm by the end of the year, according to BNP Paribas Real Estate. Average office rents in the city in Q2 rose 6% to €23.90, while within the S-Bahn ring they rose to €27.10 per sqm.
In a recent meeting with REFIRE, TLG Immobilien’s chief operating officer Jürgen Overath said that TLG intends to continue the sale of non-strategic properties and portfolio appreciation through asset management and development activities. New office buildings are planned for Berlin’s Alexanderplatz and Dresden’s Postplatz. It will continue to seek “selective acquisitions” of office real estate in urban areas. The real estate portfolio’s value rose from €3.4bn to €4.1bn in 2018, contributing to the debt-to-capital ratio falling to 34.7% and giving TLG more than €1bn in firepower.
In a statement on the company’s annual results shortly thereafter, COO Overath said, “In 2018, we further reinforced the property portfolio of TLG IMMOBILIEN with strategic acquisitions of office properties. From 2019 onwards, we will spur on our growth with even more determination by investing in our portfolio; we see the potential for around €820m of value creation over the next decade. Office developments on space that is already in our portfolio, such as on Alexanderplatz in Berlin and Postplatz in Dresden, will make a significant contribution. We are also ready to launch two other projects in Berlin and Dresden. At the same time, we plan to acquire attractive properties when the opportunities present themselves. Having started in 2018, we will continue to optimise our portfolio by disposing of non-strategic properties in 2019.”
Earlier this year, TLG Immobilien disposed of a portfolio of 29 small retail properties to the Irish group Greenman Investments for €118m. TLG says the assets had become too expensive to manage due to their widespread non-strategic locations.
Current new projects include the development of a new commercial quarter near Berlin’s Ostbahnhof, the “Wriezener Karree”, with 37,000 sqm. In Dresden, TLG will be starting on two developments this year - the “Neo” office building in Großenhainer Strasse, in a joint venture with KPE of Wiesbaden, which is already 43% leased to an international online retailer, and the project Annenhöfe on Postplatz, with 20,000 sqm.
