Good news for pinched project developers: According to a joint
study conducted by Savills and the financial advisor company Flatow
Advisory Partners (FAP), investors seek to pump circa 3.2 bn. euros
into German real estate projects. This amount of money would be
enough to carry out projects worth 10 to 12 bn. euros. That, at
least, is the theory.
Savills and FAP found 21 investors altogether who are planning
to commit capital to finance German building projects, 50 percent
of whom are from Great Britain and one fifth each from the United
States and Germany. Besides institutional investors there are also
specialized investment funds, banks and family offices, as well as
wealthy private individuals. Depending on project and investment
model, their claims on yield on investment range between 9 to 20
percent p.a., with two-digit claims on yield usually comprising a
fixed and a flexible part.
For this reason, Breuer believes that project developments are
lucrative investment products for investors, particularly as the
most recent peak yields for investments in building stock were at
circa 5 percent and even below. “The definite timeframe of one to
three years and the opportunity to fashion project developments in
different ways are very enticing for investors”, Breuer
says.
Before the financial crisis, banks generally offered generous
credits for building projects. Today, however, they demand a much
higher equity participation, amounting to 25 up to 35 percent of
the total capital expenditure. Many developers are not able to
raise this amount of money on their own, which is why they depend
on external investors. The great challenge now consists in bringing
together capital investors on the one hand and project developers
on the other hand. “Many developers are not even aware of the fact
that equity is available for the financing of their projects”,
explains Curth-C. Flatow, the founder and managing partner of FAP.
While most projects are only known on a regional level, investors
usually operate on a national or international scale. FAP and
Savills want to establish the connection between the two parties.
This also implies that they have to overcome certain prejudices.
“Especially smaller developers have qualms about problems that may
be created by cooperation with an unknown investor,” describes
Flatow.
But the investors do not comp their coffers; first, the planners
must meet certain minimum requirements. According to Flatow ”[a]
positive current account, a 20 % percent participation in the equity
demanded by the bank and a plausible marketability analysis are a
must for project developers.”
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