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Internos announces the first closing of the Internos Hotel Real Estate Fund with initial equity of €75 million from four German institutional investors.

The fund manager has also exchanged contracts for the purchase of its 4 hotels strong seed portfolio with a total investment of over €100 million with related debt provided by Bayern LB. The hotels are 3-4* hotels with a long, stable trading record, located in major cities in Germany and the Netherlands and operated by three different major hotel groups under long leases. The locations in the core euro zone, high stable income, diversification and conservative debt of 40% contribute to the low risk profile and reflect Internos’ strategy for institutional, core investors in today’s risk averse market. The portfolio’s pricing and low interest rates lead to forecast dividend yields and IRRs of 7.5+% net and 11+% respectively.

The Fund is structured as a German ‘Spezial Fonds’ operated by Internos’ Kapital Anlage Gesellschaft (KAG). Internos expects to raise additional equity for the fund to reach AUM of up to €300 million in order to acquire several hotels which are under detailed negotiations. The Fund will be managed by Jochen Schaefer-Suren, the Partner in charge of Internos’ Hotel & Leisure division as well as Paul Muno and the remaining Internos KAG team in Germany.

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At the shareholder meeting of DIC Asset AG in Frankfurt am Main, the Chairman of the Board of Directors, Ulrich Höller, also discussed the operative development during the first semester 2012, quoting initial preliminary figures.

The great letting performance seen early in the year persisted in the second quarter. According to a first preliminary assessment, the letting volume amounted to around 105,000 sqm during the first six months (Q1 2012: 51,900 sqm, H1 2011: 137,800 sqm). This interim result is fully according to plan for the year as a whole, and confirms the sound operative performance of the in-house real estate management of DIC Onsite. The Company believes that it is well on its way to achieve its operative targets, one of them being the reduction of the vacancy rate by one percentage point to around 11.5 per cent by the end of the year.

Moreover, sound results were achieved in regard to upcoming debt financing decisions. To date, eleven loans in a total volume of approximately €500 million were arranged for refinancings of portfolios or single assets, for acquisitions and for project financings. In the process, the Company collaborated with more than a dozen German banks. All of the debt rollovers planned or required in 2012 have already been implemented or else been arranged in the form of binding premature approvals. As single biggest transaction, this included the debt refinancing of a portfolio from the co-investment segment in a volume of more than €90 million. The new lender is HSH Nordbank, a bank with whom debt financing over approx. €40 million had been fixed for two single properties in late 2011. This latter case, too, involved the repayment of a loan approaching maturity, and simultaneously the optimisation of its financial structure. As before, the debt financing for the existing properties was agreed long-term, subject to non-recourse loan structures and on favourable terms so that the currently low interest level is secured for the long run.

DIC Asset also announced the acquisition of another office property, involving an investment volume of approximately e44 million and for the “DIC Office Balance I” institutional real estate fund. The investment asset represents the new construction “Loftwerk” in an excellent office location in Eschborn near Frankfurt being constructed by Hochtief Projektentwicklung, With the completion still six months away (year-end 2012), about 75 per cent of the property is already let long-term to three high-net-worth tenants. The property, which provides a lettable area of 14,700 sqm, is characterised by a high-end fit-out and complies with the latest green building standards (DGNB certification). The transaction was brokered by Trompetter Immobilien. With transfer of ownership the acquisition brings the fund volume of “DIC Office Balance I” up to approximately € 315 million.

With around 73 per cent of the share capital represented at the shareholder meeting, the motions submitted by the senior management were passed with clear majorities for every item on the agenda (for a summary of the voting results, see the table below), among them the distribution of a dividend in the amount of €0.35 per share (2011: €0.35). Based on the current share price, the dividend yield equals around 5.2 per cent. Prof. Dr. Gerhard Schmidt (Chairman), Klaus-Jürgen Sontowski (Deputy Chairman) and Michael Bock were re-elected as Members of the Supervisory Board for another term.

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FMS Wertmanagement announced that the financial result for its first full fiscal year 2011 is dominated by write-downs taken on the Greek portfolio, which had become unavoidable after the bond and debt swap programme conducted by the government of Greece. Total valuation allowances and risk provisions amounted to 10.25 billion Euros Euros at the federal winding-up institution, which took over risk positions and non-strategic operations of the HRE Group in 2010, resulting in a net loss before loss compensation of 9.97 billion Euros.

“The large risk provisions caused by the Greek exposure and totalling 8.9 billion Euros could not have been foreseen in the original planning for the winding-up institution,” states Executive Board spokesman Dr. Christian Bluhm. “With risk provisions of these dimensions the successes we´ve had winding up the portfolio unfortunately took a back seat.“ From the time the portfolio was transferred to the end of 2011, the original nominal value of 175.7 billion Euros was reduced to 160.7 billion Euros, a decrease of 8.5%. Excluding currency effects, the value of the portfolio would have declined by 19.6 billion Euros, or 11.2%, thanks to sales as well as principal and other repayments.

Moreover, initial highly complex portfolios were restructured with the aim of significantly improving the results of liquidation of individual portfolio components. Despite the reduced portfolio, total assets increased by 2.6% to 341.8 billion Euros in fiscal 2011. Among other factors, this is attributable to the need to provide increased collateral to counterparties due to contractual obligations relating to financial derivatives as a result of the strained market situation.

Net interest and commission income totalling 611 million Euros considerably exceeded general and administrative expenses amounting to 348 million Euros. The volume-related decrease in interest income was largely balanced out by more favourable funding opportunities. For instance, commission expenses were down sharply as a result of full repayment of SoFFinguaranteed issues by way of FMS Wertmanagement’s own issues in the course of 2011. FMS Wertmanagement quickly established as a reliable issuer on international money and capital markets. The institution raised medium- to long-term financing of around 20.8 billion Euros via several bond issues in 2011. Awarded the highest ratings from leading rating agencies, FMS Wertmanagement also easily covered short-term funding requirements on the money market and therefore reduced ECB funding by nearly two-thirds as at 31 December 2011. “This confirms that the fundamental principle of a government winding-up institution implemented by the German Financial Market Stabilisation Act works and is financially successful, too," says Dr. Bluhm. “With affordable funding, we are gaining the time we need to unwind the portfolio while maximising value.”

The 348 million Euros in administrative expenses incurred by FMS Wertmanagement mainly comprise expenses for services performed by the HRE Group in accordance with a cooperation agreement. In fiscal 2011, FMS Wertmanagement spent a total of 267 million Euros for this servicing of the portfolio by the HRE Group. Because the EU requires the cooperation agreement to be terminated in September 2013, FMS Wertmanagement undertook extensive preparatory work over the past year to establish its own service company to provide the required services from this point onward. The service company was formed in April 2012. At the same time, invitations to tender have been issued for other services, such as IT, that FMS Wertmanagement aims to outsource to external providers.

“Severing the final ties to HRE is an ambitious project, and one we are working on at full throttle along with our colleagues at HRE,” according to Executive Board spokesman Dr. Bluhm. The loss from ordinary activities reported for fiscal 2011 is offset in the annual financial statements of FMS Wertmanagement by a loss compensation claim in respect of the German Financial Market Stabilisation Fund SoFFin. At the end of 2011, the current loss compensation amount was 9.9 billion Euros. For 2012, FMS Wertmanagement expects a greatly improved result. “However, appreciation of our portfolio’s value depends highly on macroeconomic factors,” says Bluhm. “Regardless, we will, of course, take advantage of any opportunity that arises to unwind additional positions while maximising value and further reduce complexity in the portfolio.

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Today, the Management Board of GWB Immobilien AG filed for insolvency proceedings at the competent local court in Reinbek. The Management Board and the preliminary insolvency administrator will work together to secure the continuity of the company within the insolvency proceedings.

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Ryden, on behalf of landlord Industrious, has signed up two new tenants for Dartstone West Industrial Estate in Leeds, bringing the 15,849 sq ft estate to full occupancy.

SAS International Limited, a manufacturer of interior products, has taken a 3,700 sq ft warehouse on a seven year lease, whilst Statement Exhibitions, an exhibition and display design and production company, took 7,555 sq ft on a eight year lease. The rentals achieved were in the range of £4.00 - £4.50 per sq ft.

Both SAS International and Statement Exhibitions were unrepresented in the deals.

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Legal & General Property (LGP), owner of the former Elstree Business Centre on Elstree Way, in Borehamwood, Hertfordshire, has today unveiled images of its £10 million plans to regenerate the site.

The proposals include a new Wickes store, which will replace the current store in Borehamwood Shopping Park, along with nine industrial and warehouse units. Demolition of the existing obsolete buildings is well underway and, if approved, the plans are expected to generate a significant number of jobs for the local area.

A planning application was submitted in March a following public consultation during January 2012 and Hertsmere Borough Council’s planning committee is expected to make a decision on the scheme in the next few weeks. Subject to planning approval, construction could start later this year with the new Wickes store opening in late 2013.

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Henderson Global Investor’s £12.5 billion Property Business has hired Mark Cruddas as a Senior Portfolio & Investment manager for its £1.1 billion UK Retail Warehouse Fund. Mark joins from Prupim where he worked for four years across a range of funds, with a specialism in retail assets. During his time at Prupim, he transacted over £400 million of investment deals. Prior to Prupim he worked at DTZ for 6 years in the Retail Investment team.

The Fund has recently concluded a series of asset management deals including a surrender of the Brantano unit at Kidderminster to accommodate a new letting to Boots; Pets at Home have taken a 10,000 sq ft unit at Derby and Wren Kitchens have exchanged contracts to take 9,500 sq ft at Staples Corner.

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London & Stamford Property Plc has exchanged contracts to acquire an office building Marlow International in Marlow from Avestus for £50.15 million (excl. costs). This reflects a net initial yield of 8.9%.

The property is a Grade A office building comprising 231,016 sq ft and was comprehensively refurbished in 2000. It is located just off the junction of the A404 in Buckinghamshire and is three miles from the M40 and eight miles to the M4. The property is let in its entirety to Allergan Ltd, Veolia Water Solutions Ltd and Dun & Bradstreet Ltd and for a weighted average unexpired term of seven years. The property includes a fully fitted and equipped 500 cover restaurant and 854 underground and ground level car parking spaces.

It is anticipated that leverage will be applied to this asset in a cross collateralised arrangement with Unilever House, Leatherhead. The cash yield on the combined portfolio will then be 11.2%.

Raymond Mould, Chairman of London & Stamford, said:
„Following the announcement of our acquisition of Unilever House [we reported], Leatherhead, last week, we are delighted to announce our second office investment in the South East. Marlow International is a high quality property in an attractive location offering excellent cash yields combined with a high quality secure tenant mix and attractive asset management opportunities. These deals when combined with our acquisition of Moore House on 22 June 2012 [we reported], complete c.£260 million of the potential investments I advised on in my statement at our year end results.“

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The Industrial and Commercial Bank of China (ICBC) concluded a lease agreement for their first office in Poland. ICBC has leased 1,200 sq m of office space in Griffin House in Warsaw. Griffin House is an A class office building, located at Trzech Krzyży Square, one of the most prestigious areas in the heart of Warsaw. Griffin House was completed in 2006 and has 6,300 sq m of office and retail space. CBRE acted as agent.

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According to a new retail market summary by Jones Lang LaSalle small markets gain momentum. They are responsible for 50% of new retail space delivered in Q2 2012. Convenience sector grows in importance.

Supply
In the second quarter of 2012, the shopping centre market expanded by 132,000 sq m. This new stock was shared between five new projects and two extensions. The total shopping centre supply across the country is currently 7,8 million sq m. Altogether, since the start of the current year, shopping centre stock has increased by 220,000 sq m, which accounts for approximately 50% of the total floorspace planned for 2012. Half of new stock in Q2 was shared by cities with populations below 200,000 inhabitants. This confirms that investors interest in smaller markets is pronounced and not just interim.

The largest project completed during Q2 2012 was Galeria Korona in Kielce (34,000 sq m), developed by Libra Project. Along with the recently extended Galeria Echo (66,000 sq m), it is the second scheme in this city to feature a similar tenant mix and profile. The retail offer in Gorzów Wielkopolski was substantially widened by the delivery of Nova Park (32,500 sq m). In Tczew, Galeria Kociewska with a four-screen cinema and a supermarket has just been completed.
The extension of Słupsk’s Jantar shopping centre saw an attractive new leisure component being added (multiscreen Multikino cinema - the first in town - and bowling) together with new brands joining the portfolio. In Wrocław, a new shopping mall was opened as a part of the larger Sky Tower residential and office complex. Finally, Galeria Brwinów was completed in Brwinów, a satellite town in the Warsaw agglomeration. The 6,200 sq m scheme is a good example of the increasing significance of the convenience sector.

Outlet centres, the number of which currently totals seven, are strengthening their performance. Additional three projects are now in the pipeline, the two of which are to be completed still in 2012 – Outlet Park in Szczecin by Echo Investment and Ptak Outlet in Rzgów near Łódź by Ptak Holding.

Demand
Vacancy rates in shopping centres have been stable across the country in the second quarter. The retail park sector features lower demand than that for shopping centres, especially demand from fashion chains. The exact opposite is found with convenience centres, strip malls and small retail parks, whose prospects seem buoyant. This is particularly the case in smaller cities, where these compact projects (with floorspace usually not exceeding 5,000 sq m) are perceived as a good alternative to regular shopping centres.

A number of newcomers have started operations on the Polish market, i.e. Karen Millen, LC Waikiki, COS, Kari, Tretorn and Carpisa. In addition, the market debuts of Victoria’s Secret and American Eagle Outfitters have been announced. Additional chains are investigating the Polish market and looking for entrance opportunities.

Rents<
Prime rents which concern best floorspace in leading shopping centres remained unchanged on most of the markets. However, in Warsaw a surge of approximately 5% was witnessed, which can be put down to recommercialization process in key projects.

2012 Perspective
At the start of the second half of the year approximately 620,000 sq m of new shopping centre space is under construction, with deliveries to span over the next two years. The majority of floorspace will emerge in small and medium projects (60%) and will be located in cities with populations lower than 200,000 inhabitants (51%). Construction activity in the eight major agglomerations totals 302,000 sq m, out of which 80% is scheduled for 2013 (Poznań City Center, Auchan Bronowice in Kraków, Centrum Wzgórze in Gdynia, Galeria Katowicka and Plac Unii in Warsaw).

Grażyna Melibruda, Associate Director in Retail Department in Jones Lang LaSalle comments: “Market expansion of retail chains remains cautious but stable. Careful examination of each new location is still a must in order to avoid stores cannibalizing their turnovers. On the back of the crisis, many retailers were forced to reduce the size of their portfolios and withdraw from the least profitable locations. Some chains have temporarily put their expansion on hold, and are waiting for the rebound of the economy. Others, particularly those with more accessible pricing, are continuing their intense growth”.

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AXA Real Estate Investment Managers announces that, on behalf of the European Added Value Fund “EAVF”, it has sold a portfolio of 15 properties in Sweden to FastPartner.

The Portfolio comprises 15 properties located throughout Sweden which have a total lettable area of approximately 52,000 sqm. The portfolio is predominantly let to Mekonomen, Scandinavia’s largest car repair chain, and includes Mekonomen’s central distribution warehouse the Bussen 3 logistics property.

Henrik Bastman, Head Of Asset Management - Nordic Region, commented on the disposal: “As the EAVF approaches the end of its natural life, this sale is part of our strategy to undertake an orderly sales process in order to maximise returns to investors. The sale underlines the fact that there is good demand for quality assets let to strong tenant covenants.”

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Cushman & Wakefield (C&W) has won the exclusive mandate for the sale of the office complex at Moscow, Lefortovskiy Val, 15/3. The building will be sold by separate blocks from 200 sq m.

Office Building “Lefortovskiy Val, 15/3” is situated in the South-East district of Moscow and has good transport accessibility due to its proximity to the Third Transport Ring. The total area of the multi-level building (2-5-19-25 floors) is 16 600 sq m. Four level of underground parking provides 160 parking lots. The building is under construction with a grand opening planed for the first quarter of 2013. Cushman & Wakefield's team, responsible for the project, include Mikhail Mindlin, Head of Sales and Acquisitions, Office Agency and Kermen Mastiev, Director.

Mikhail Mindlin, Head of Sales and Acquisitions, Office Agency C&W: “The office complex is situated in a district with a lack of quality office buildings. The main office supply consists of poor quality office space. We are sure that there is unsatisfied demand from midsized and small businesses and entrepreneurs, who look for quality office space in modern buildings for a moderate price”.

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„Sombrero” is a local shopping center in the south of Moscow in the busy district of Chertanovo, a densely populated district of Moscow. It has opened at the end of June. The three level shopping center with a total area of 17,300 sq m and a GLA of 6,200 is home for «O'Key Express» supermarket, Ile de Beaute, 'Stin, Gloria Jeans, Incanto, Henderson and children's goods store «Deti» and many others. The project developer is company Reksant. Cushman & Wakefield was the exclusive leasing agent.

Irina Rachevskaya, Senior Consultant, Retail Services at Cushman & Wakefield comments: „Local shopping centers, especially situated near underground stations, such as «Sombrero», are traditionally extremely popular with local inhabitants. We are sure that due to optimal tenant mix, proximity to the metro station and location in the center of a highly populated district, the shopping center «Sombrero» will be a hugely popular destination for shopping and leisure customers“.

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The new logistics hall at Bratislava Logistics Park in Senec attracted a large number of visitors for a launch party held in the recently completed building. Karimpol welcomed over 100 guests to the event.

Peter Bahnik, head of Customer Relations at Karimpol Slovakia, said, “The high level demonstrates the growth in the Slovakian economy."

Bratislava Logistics Park is located adjacent to the D1 (E75) motorway within the Senec area. The new Phase C offers over 36,000 square meters of the highest quality class A warehouse and production space. Unique features such as superior thermal insulation and glass facades make the building an attractive headquarters but also more economical than other similar parks.

Tom England, Managing Director of joint exclusive agents Modesta said, “The high level of interest in the new warehouse and production space was proved by the large number of people who attended the launch party. We carried out numerous viewings over the evening and look forward to concluding the letting agreements.”

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