BNP Paribas Real Estate Investment Management (BNP Paribas REIM) Germany has launched a new residential fund focused on German growth markets, the “Wohnfonds Wachstumsstädte Deutschland” fund. The open-ended real estate special fund invests in stock and new-build properties with a focus on sustainability.
The fund aims to build a strong portfolio diversified by region and growth drivers. BNP Paribas REIM’s goal is to generate a distribution yield of 3.25% p.a. over the long term. The open-ended special real estate AIF, which was launched in accordance with the German Investment Code (Kapitalanlagegesetzbuch - KAGB), has a core and core+ risk profile and is particularly suited for commercial banks and savings banks as well as pension funds, pension schemes and insurance companies.
“We are seeing increasing demand from our institutional investors for assets that deliver reliable income distributions in the current market environment. Established residential properties offer precisely the risk-return profile that these clients are looking for,” says Claus P. Thomas, Chief Executive Officer of BNP Paribas REIM Germany.
Risk assessment also includes a pandemic scoring model, which was developed by BNP Paribas REIM in December 2020. The model identifies the resilience of tenants, assets and infrastructure and provides insight into the overall long-term value of an asset. The fund has already acquired its first asset within the scope of a forward deal, a property development with over 200 residential units in one of Germany’s primary cities.
Growth market residential: crisis-proof with excellent prospects
German residential properties have proven to be a very sound investment, and not just during the pandemic. Hardly any other asset class offers such stable cash flow and capital growth underpinned by strong, long-term growth drivers.
Housing is a basic need and demand for residential space will continue to rise in the foreseeable future. The number of German households grew by 3.9% between 2013 and 2019 alone, which means additional demand for 1.57 million units. Primary cities such as Berlin, Frankfurt, Munich and Hamburg and the conurbations surrounding them will benefit most from this trend. The shift toward reurbanisation has caused demand for housing to rise 6.9%. The number of single-person households is also expected to increase from 42% in 2020 to over 45% in 2040. Another important aspect is the ongoing increase of space taken up per person: in 2000 one person took up an average of 39.5 sqm, by 2019 this number had increased to 47 sqm. Residential property prices have also experienced a solid upward trend. Between 2014 and 2020 the multiples for new buildings in primary cities increased by 6 points to 34x in Munich, 32x in Frankfurt and 31.5x in Düsseldorf, Cologne and Hamburg.
The Wohnfonds Wachstumsstädte Deutschland residential fund: rental units with growth potential
In its Wohnfonds Wachstumsstädte Deutschland residential fund, BNP Paribas REIM focuses on stock properties and multi-family property developments featuring 1 to 2-bedroom apartments in established and up-and-coming locations with upside potential. At least half of the fund’s capital will be invested in properties in the metropolitan regions of Germany’s Big 7, the country’s seven most important real estate markets. Other major cities with excellent infrastructure and above-average economic and population growth, such as Bonn, Hanover, Leipzig and Nuremberg, will account for around 10% to 30% of fund allocation. Another 10% to 30% of fund capital will be allocated to cities with a high influx of young people around growth drivers such as universities and research locations, e.g., Freiburg, Erfurt, Osnabrück and Regensburg. Although these cities have lower market liquidity, they offer higher return potential. At fund level, investment focus will be placed on stable rental income with upside potential as well a on diversification by region and growth drivers. Operator-run properties, luxury apartments and properties with a maintenance backlog will be excluded from the fund’s investment strategy. The goal is to purchase around 3 properties a year, each with an average transaction volume of €50m. Minimum fund target investment volume is €500m with an LTV of up to 45%.
All markets and properties are analysed and evaluated annually by BNP Paribas REIM’s research team and assessed for long-term risks. The BNP Paribas REIM team also assesses all properties in regard to sustainability criteria. The target here is a weighted average ESG score of at least 65 out of 100. The fund issues regular reports in accordance with Article 8 of the European Sustainable Finance Disclosure Regulation (SFDR).
German full-service capital management company for investors subject to German KWG or VAG
The Wohnfonds Wachstumsstädte Deutschland residential fund is managed by BNP Paribas REIM’s own capital management company in Munich. The capital management company meets the regulatory requirements relevant for investors subject to German KWG and VAG and provides all necessary reporting in German.
Key data for the Wohnfonds Wachstumsstädte Deutschland residential fund
|Asset manager & capital management
|BNP Paribas REIM Germany GmbH|
|ISIN / WKN||DE000A2DP602 / A2DP602|
|Structure||German open-ended real estate special AIF in accordance with KAGB|
|Inception date / fund currency||12 January 2021 / EUR|
|Types of use||Residential housing (stock and new-build)
(maximum 20% of other types of use per asset)
|Risk profile||Core, core+|
|Target distribution yield||10-year average of at least 3.25%|
|Minimum subscription amount||€3 million|
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