“Logistic” kick-off-event of the year “Die Logistikimmobilie” in Leipzig: successful, informative and revealing for RLI
Wolfgang Holzberger, Peter Wenzel and Anita Lang-Schmid represented RLI Investors at the annual Euroforum meeting. There they informed themselves about current developments and facts and figures on the logistics real estate market in Germany, shook hands with established contacts and made new ones and listened to interesting lectures on topics around logistics. However, RLI was present not only as a participant, but also in the discussion round “Investment & Financing: Yield, Interest and Potential” in the form of the further Managing Director and Transaction Manager Wolfgang Holzberger. Under the moderation of Uwe Veres-Homm from the Frauenhofer Institute, he and his co-deputies Patrick Frank from Frasers Property Europe and Ingo Steves from Gazeley Northern Europe offered the audience an entertaining, sometimes controversial and professionally well-versed discussion.
Summary of questions and answers addressed to Holzberger:
Veres-Homm: Your current RLI Logistics Fund – Germany II acquires logistics real estate from industry, commerce and e-commerce in good to very good locations in Germany as part of a core plus strategy. How do you define your core plus strategy?
Holzberger: Our portfolio is designed in such a way that we can achieve a more attractive return compared to the market through a mix of properties. The first fund we launched in 2017 had a return forecast of 7.00%. To the delight of our investors, we can currently comply with these. The second fund currently stands at 6.75%. Of course, this can only be achieved by considering somewhat older properties in addition to the core properties. So we identify existing real estate, where there is still construction law available and where for example densifying potential, an underrent and, of course, re-lettability are given. In addition, we buy project developments in the form of forward deals. As part of a manage-to-core approach, our small, powerful asset management team with years of expertise in both letting and project development takes care of increasing the value of the property. We are very active in the market and have positioned ourselves as a “small” investment house in the investment market for logistics real estate
Veres-Homm: Looking at your current portfolio I have noticed that out of a total of 29 logistics properties, only five are east of the A7, i.e. in the eastern half of Germany. How would you describe your regional priorities? Why did you buy only a little in the (south) east of Germany?
Holzberger: Your observation is correct, there are five properties. We have invested where we see the strongest markets. And in our opinion they are doubtless west of the A7. Also with regard to the consumer agglomerations and the production sites, logistics services are the focus of attention there. Bavaria and Baden-Wuerttemberg are special because the price increase there has accelerated rapidly and logistic assets are therefore only very selectively eligible. I mentioned at the beginning, with which return expectations of the investor we started. The difference is already very big. For this reason, the map will not only do something in the Leipzig, but also in the Berlin region. This regional distribution with a focus on West Germany is therefore only a snapshot. The positive developments, especially in the Leipzig region, will certainly lead to transactions.
Veres-Homm: Only four years ago, objects with a multiplier of more than 15 were regarded as hopelessly overpriced even by conservative investors. Today we see objects going over the investor’s table for 22 times the annual rent. How far do you go along the price spiral and where does it end at the end of the decade?
Holzberger: Such a price level is absolutely overpriced in our opinion. Not only against the background of the promised return for our investors, we are not prepared to call such high prices. We think that newly built logistics real estate in very good locations will be between 18 and 21 times, even within 5 years.
But every coin has two sides, because on the one hand, the current price development makes investment difficult because we have to be very selective. On the other hand, our existing fund can look forward to increased price growth, which means that we can go into a de-investment phase much sooner than expected.
Veres-Homm: At the end of 2020, a new property in Starpark Halle will be traded as a core property. That’s what …
Holzberger: The market is currently very active. Almost every month, at least one press release on 10 to 15,000 m² of new development in the Leipzig-Halle region is published. The Starpark has developed very positively, with steady immigration in the e-commerce sector. However, I am a little uncomfortable when looking at the sight of the free land as it can always result in new competitive situations.
The area growth last year was very considerable. Interestingly, there has also been a rent increase, which I had not expected because of the new construction projects. This encourages me that this is a good investment location. Good location factors that confirm that a core investment in Halle is well conceivable and achievable – even in 2020.