REAL ESTATE MARKET AUTUMN 2007

Transcription

1 REAL ESTATE MARKET AUTUMN 2007 Hubert Maierwieser Czech Real Estate

2 Fund (CREF) B.V. - Organizational Structure Czech Real Estate Fund (CREF) B.V. Purchase Power: 100 mio EUR Investment Advisory and Asset Management Agreement Raiffeisenbank a.s. as one of the Sponsors/Shareholders and Main Financing Partner 100% Czech Real Estate Asset Management s.r.o. Investment Advisor for Czech Real Estate Fund (CREF) B.V. covering investment proposals, due diligence, negotiation of purchase documentation SPC 1/Property 1 SPC 2/Property 2 SPC 3/Property 3 Contact: Czech Real Estate, Chrudimska 2526/2a, Praha 3 Hubert Maierwieser - phone , mobil maierwieser@cref.cz

3 Czech Real Estate Fund (CREF) B.V. Founded in January 2007 Current contracted Portfolio: 5 assets totaling 960 mio CZK Deal size 40 to 350 mio CZK Diversification over office, retail and logistic/industrial properties Special Property types possible: hospitality, senior residences, leisure properties, Residential ( both panelaks and new flats ) Forward Purchase and Forward Funding Co-Investment in Development Projects Sale & Lease Back of Corporate Real Estate (tax optimized) Property Repo (sale with buy back option)

4 Why Real Estate? Half the world s wealth is in Real Estate Warren Buffet An Asset Class powered by... Visions Emotions History

5 Real Estate: higher return lower risk Czech Real Estate Source: National Association of Real Estate Investment Trusts Assumes investment of $100,000 on January 1, 1997 in each portfolio depicted above. All investment proceeds and earned interest are reinvested annually. Stock returns are based on S&P 500 results provided by Standard & Poors, cash investments assume the average three month government T-bill rate based on information from the U.S. Federal Reserve, bond returns are based on the Lehman Aggregate Bond Index and private real estate returns are based on data provided by NPI NCREIF.

6 Risk Return Profile of Investments (1/1992 1/2006): Return (%) German Bonds Open-end Real Estate Funds Germany 2) International Bonds US REITs 1) European listed Property Shares European Shares (STOXX 50) German Shares (DAX) Volatility in % Source: Initiative Finanzstandort Deutschland/Deutsche Bank Research 1) REIT ( Real Estate Investment Trust = tax privileged real estate investment company listed and tradeable on the Stock Exchange) 2) Open end Real Estate Funds in Germany have a total volume of approx. 80 bn EURO.

7 Shift in Europe s center of gravity adds momentum to CEE real estate markets The traditional European Business Banana of wealthy regions is moving eastwards. Today we find the Business Banana of economic dynamics in Prague, Bratislava, Budapest,.. thus backing prospering real estate markets!

8 Real Estate Investment Management Developers Property Owners (private individuals. companies, state&communities) Real Estate Investment Managers like REICO, Realtia, Czech Real Estate Asset Management (CREAM) organize and manage Real Estate Funds Funds for Qualified Investors Private Placements Retail Investors HNWI High Net Worth Indivuduals Institutional Investors (Pension Funds,...) Estimated Market Size in Czech Republic: Approx. 60 bn CZK

9 Investment Styles» Annualized Target Return ( on leveraged basis ) Core/Core % p.a. Purchase of completed, income generating properties Value Added 10 15% p.a. Properties with need of repositioning, redevelopment, letting activities Opportunistic 15% - 25% p.a. New Developments

10 The Art of Real Estate Investment Property Sourcing Exit Refinancing Property Management Success Factors for Real Estate Investments Property & Risk Analysis Negotiate the Deal Execute the Deal Portfolio Management

11 Dos and don'ts for the Real Estate Investment Manager Know your market Real Estate is a local business Don t fall in love with buildings Your job is to buy income streams and not bricks and mortar It s not a beauty contest, it s a cash flow contest Stick to your investment strategy - it s like monopoly, but with real buildings Keep your eye on the long term perspective - Real Estate is a long term play Be honest to investors, because you must deliver what you promise Absolute transparency in accounting, reporting and fees

12 Fee Structure for Real Estate Investment Management Asset Management Fee: for managing the properties ( p.a., fixed percentage of Gross or Net Asset Value ) Transactional Fee ( one off fee on the acquisition and disposal of assets(properties) ) about 1% Performance Fee ( Carried Interest ) calculated either during the life of the fund/investment or at the termination of the fund/investment as a percentage of the performance over a defined Hurdle Rate. Example: Hurdle Rate is defined at 10% and Carried Interest is 20% 50 mio CZK Property Investment in year 2007, Sale of Property in year 2013 at price of 68 mio including the dividens/distributions during the 6 year holding period totaling 22 mio the annualized return p.a. amounts to 11,67% - then 1,67% of the annualized return are above the Hurdle Rate of 10% - the Carried Interest is 20% of this 3% out-performance. Carried Interest is important for Alignment of Interests between Investor and Investment Manager

13 Real Estate offers chances for everybody - for developers, property owners, real estate investment managers and investors, - and: it does not matter if you are a big player or small player! It s like with the lion and the gazelle... Every morning when the sun rises in Africa there awake a lion and a gazelle. The lion knows he must run faster than the slowest gazelle in order to not die of hunger. The gazelle knows that it has to run faster than the fastest lion in order to not be eaten. It does not matter if you are a lion or a gazelle. But when the sun rises you would better start running.