Luxembourg still good for real estate investors

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Photo of Hans Werner Stuckart, Director, Corpus Sireo Investment Management, LuxembourgINDUSTRY INTERVIEW: Hans Stuckart, Director and Deputy Fund Manager, CORPUS SIREO Investment Management S.à.r.l., Luxembourg, has experience in real estate fund investment and management. Like Keith Burman, whose thoughts we posted last week, Hans attended the recent Global Real Estate Institute Europe Summit 2011 (GRI) in Paris.

The GRI describes itself as “a global club of senior real estate investors, developers and lenders… at GRI meetings there are no speakers or panellists, just informal discussions in small groups, where everyone participates equally.” Tia Azulay, RealCorp’s Head of Communications, asked Hans Stuckart for his opinion of the summit from a real estate funds perspective.

  1. Which discussions at the GRI Summit 2011 were most useful for you?
    Definitely, discussions relating to the sovereign crisis and its impact on real estate. The unanswered questions remain where to invest money and how to evaluate alternative options given investor expectations. On the valuations side, for example, some surveyors use government bonds as an element of their discount rate. When interest rates increase suddenly (e.g. for Italy), yields for real estate artificially decompress without any evidence from the market. This brings up difficulties between fund managers, investors and surveyors, because even though good properties retain good covenant tenants and positive cash inflows, properties lose value, with a negative impact on the Net Asset Value as a result of sovereign negative rating. The quick-fix then may be to change the surveyor or the surveying method.
  2. Did you draw any general conclusions from the conference?
    The general market uncertainty means that investors are very cautious. Even though they are sitting on enormous amounts of equity right now, they don’t know where to invest it. They are only slowly getting used to lower returns and adjusting their expectations.
  3. In light of this uncertainty, how are you finding the capital-raising market?
    It is difficult to raise funds at present, even from the usual reliable players: insurance companies, family offices and pension funds. They are making some investments, but very cautiously and slowly. It takes an enormous amount of time and effort to convince investors to release money. On top of that, when they do invest, some investors prefer using their own money, rather than financing, even if this means a reduced return rather than benefitting from leverage. This raises the question of what this means for the banks which are now side-lined from these core property deals.
  4. Have any recent developments in the global or European markets altered those conclusions?
    No, my perceptions are still the same—uncertainty prevails and people are seeking investments that they see as less volatile. For example, there is huge interest in retail property in Germany, especially from foreign investors, probably because, in 2008-2011, retail properties had relatively few problems with valuation and rental income compared to other asset classes. Therefore this intense interest in a single sector leads to compressed yields. While good for vendors in the short term, it may not be healthy in the long term. There is no macro-economic reason to focus on retail; it is just an idea of stability. So this raises the question of whether it is just the flavour of the month, or a sustainable trend, as German consumption behaviour has not changed and, according to a GMA/Sonae survey, 38% of German shopping centres do not perform.
  5. Is Luxembourg still an appropriate strategic base for you?
    German legislation has adjusted the Investment act a lot recently, so that Luxembourg is not quite as attractive as it was to German investors in the past; however, it still has some advantages and it remains very important from an international perspective. Luxembourg is the second-largest fund market in the world, after the USA. It is highly regulated and extraordinarily professional. The tax treaties between foreign countries and Luxembourg make it rather simple to bring diverse international investors together in the same vehicle. So we have no doubt that it is good to be here.

Hans Werner Stuckart joined CORPUS SIREO Investment Management S.à.r.l. in Luxembourg in March 2011 as a Director and fund manager of Sireo Immobilienfonds No. 4 SICAV-FIS. He was previously Head of Asset Management and of German operations for UK private equity property investment company Catalyst Capital GmbH in Frankfurt (Jan2008-Feb2011), where he was responsible for realizing implemented business plans, new acquisitions, due diligence, financial reporting and modeling and asset management for opportunistic retail and office properties, and for work-out, refinancing and repositioning of the German portfolio. As senior portfolio manager for Commerz Real (Jun2004-Jan2008), he was responsible for a shopping centre portfolio in Canada for the open-ended global property fund, and a member of shareholder and advisory committees. From 2007 he managed two open-ended institutional property funds, invested in shopping centres, office buildings and warehousing. From Jul 2000-Jun 2004 he was senior financial services auditor for KPMG Frankfurt, responsible for valuations and for audits of property loans and of private equity vehicles. He has degrees in Business Administration and in Real Estate Portfolio Management (EBS).

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