One investor group very active in Germany has been institutional investors from South Korea, notable in the last few years for the sheer size of their individual property deals.
We hear from FAP Advisory here in Berlin that the Koreans are sore about being unable to travel to inspect properties in Germany – and are losing out to local rivals here on the ground as a result. An independent consultancy, FAP arranges and structures capital for property acquisitions and development projects The company has frequently presented to investors in Seoul keen to learn about Germany.
FAP said the South Koreans are anxious to re-establish their presence in the German market as quickly as possible. Following a survey that FAP conducted among South Korean institutional investors in November, the feedback showed that the South Korean investors felt the pandemic – and subsequent travel ban – meant that local German investors were squeezing them out of attractive deals. The vast majority of South Korean investors require a physical inspection of the target property to be financed, which is now not possible. German institutional investors are also able to conclude deals more quickly and offer conditions which often fall outside of the South Koreans' required return profile, they said.
According to Hanno Kowalski, managing partner of FAP Invest, “The interest of the South Koreans in the German real estate financing market is still as strong as ever. Our contacts say that they want to get back into the market as quickly as possible and that they are already positioning themselves for this. Their interest continues to be on large-ticket core properties in the best locations – in three simple words: ‘Big, prime and secure!’ And to the extent that suitable direct property investments cannot currently be carried out, interest in alternatives is, in parallel, likewise growing.”Until recently, South Korean investors have been important providers of capital in the German market, particularly for the largest ticket deals. In the current market, however, this interest has also been extending to loan portfolios which bundle together various individual loans ranging from €20m to €50 million. "In this way, these important investors can not only reach their target investment amounts in the three-digit-million range but also gain the benefits of risk diversification," said Kowalski. For the Koreans, this is an important consideration, given that they’ve been burnt recently on loan defaults in the US in which several Korean companies were financing participants.
