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ActivumSG turns cautious on direct property investments in Germany

Saul Goldstein © ActivumSG

One of the most successful turnround specialists in German real estate, ActivumSG, has sold its last owned office asset and is moving out of direct investment, saying it is time to be cautious. After it recently floated Instone, corporate and mezzanine investments are now on the agenda.

In a release Monday, ActivumSG Capital Management, which started in 2007 specialising in European - mainly German - turnaround situations, said it completed the sale of the last German office property owned by funds that it manages. The sale highlights a shift in focus onto corporate acquisitions as a way to access attractive value-add opportunities in German real estate.

"We are very cautious about direct property investments in Germany today," said Saul Goldstein, founder and managing partner. "This sale ends a successful theme of early ASG funds, where we anticipated that repositioned assets in medium-sized German cities would attract institutional demand as the Big Seven cities got too competitive. Private equity investments or mezzanine lending generally appear the best way to access strong real estate themes in Germany for our newest funds, since their complexity allows us to avoid the crowds and to generate value-add returns for our investors."

The last asset sold was the Theo & Luise building in Mannheim, south of Frankfurt, that was disposed of by ActivumSG Real Estate Fund II to listed Berlin group TLG for €47.6m, a price that it said reflects a net initial yield of 5.9%. The 2011 vintage fund purchased the 26,000 sq.m. Grade A property from an affiliate of RBS, which had held it in a non-performing loan portfolio.

ASG has recently moved into heavily into residential development, only last month floating a company it controls - Instone Real Estate - in a private placement listing that raised €428m in total and some €142m in fresh funds. It had assembled the group from two developers in southern Germany that it acquired in recent years.

The group also announced in January that its fifth fund has attracted €489m of commitments from global investors at its final close for investing in Spain and Germany. The fund started 2018 by acquiring fairvesta, a German real estate fund management platform for private investors. Its other investments include mezzanine financing for various developments in Berlin as well as residential development and land purchases in Spain.

The Theo & Luise building, sold with 89.4% occupancy, is located in Fahrlach on the eastern edge of Mannheim, a popular office location due to its proximity to the city airport.

ActivumSG Advisory Head of Real Estate Richard Wartenberg commented: "This investment was a lease-up story following the departure of two large tenants which left us at one point with a 56% vacancy. We transformed the property into an institutional-quality asset through modernisation works and a focused leasing campaign. Market conditions have certainly made it harder to find opportunities of this kind. We’re still open to making direct acquisitions, but only when we find buildings with a compelling investment case for adding value."

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