HPBA GmbH
John Amram - HPBA GmbH
John Amram, the company’s founder and CEO, also believes strongly that the personal matching between seller and potential buyer tends to be more effective as a result of the individual structuring of the deal, leading to a nearly 52% closing rate, as against about 35% in a ‘normal’ deal.
A new study shows that the number of so-called ‘off-market’ real estate deals in Germany is considerably higher than previously assumed, with investors prepared to pay a premium to avoid the time and expense of structured sales processes and bidding wars.
The study, carried out by market research group BulwienGesa on behalf of Berlin-based off-market transaction specialist HPBA, puts the transaction volume in off-market deals at about €40bn for 2017. With a total institutional volume of about €70bn roundly agreed on by the professional broker community for the year’s overall volume, this indicates the off-market share to be about 60% of the total – a higher figure than widely assumed.
In the first-ever analysis of the off-market segment for German real estate deals, covering 682 institutional investor participants, the survey found that 96% of institutional respondents actively pursued off-market transactions in the year.
According to Andreas Schulten, board member at BulwienGesa, “For the first time ever this study creates transparency in the off-market segment for real estate transactions in Germany…Ultimately this means, among other things, that the market liquidity is significantly higher than has been assumed to date.”
The certainty of execution in off-market deals means that investors are prepared to accept a price delta of up to 10%, the study highlights. John Amram, the company’s founder and CEO, also believes strongly that the personal matching between seller and potential buyer tends to be more effective as a result of the individual structuring of the deal, leading to a nearly 52% closing rate, as against about 35% in a ‘normal’ deal.
“In a keenly-fought market situation, such as that seen in recent years, investment criteria such as certainty of execution and strategic aspects for the buyer and seller are just as important as the simple purchase price. Attaining the highest price is not always the decisive factor for the seller. Moreover, higher prices are often attained in the off-market segment than with classic bidding procedures.”
Traditional fears of off-market deals have revolved around a perceived lack of transparency in the sales process, but the study refutes this, showing how infrequent are the cases in off-market transactions where the in-house compliance rules of both parties are not adhered to.
The methodology used by BulwienGesa and HPBA took as its starting point the total of about €240bn officially taken in in property transfer tax and share deals on all German property transactions, including the €130bn volume for private residential transactions, as documented by Germany’s Arbeitskreis der Oberen Gutachterausschüsse (AK OGA), or Working Group of Senior Valuation Expert Committees. From the remaining €110bn of business transactions, the €70bn accounted for by the broking community is removed, leaving about €40bn as being the off-market volume.
A lack of reliable data, and the handling of many transactions as share deals have hindered clarity and an accurate estimation of the size of the off-market segment in the past, say theBulwienGesa researchers.
BulwienGesa and HPBA define off-market real estate transactions as follows: “An off-market transaction in the real estate sector describes the trading of one or more properties in the form of a sale or swap deal, which – in contrast to structured bidding procedures or marketing through brokerage platforms – takes place behind closed doors. In this respect the trading takes place on the basis of specifically addressing a small group of investors or exclusive bilateral negotiations with just one potential buyer by the seller himself or through a specialist off-market consultant. In a non-formal process the procedure can be structured flexibly with respect to transaction volume, contractual modalities and timeframe in line with the individual needs of the buyer and/or seller.”
Both BulwienGesa and HPBA said the survey would now be conducted annually, “to serve as the foundation for the measurement of the off-market segment”.
