Marco Knoblauch, Fund Manager for Propfund Germany 1 GmbH & Co. KG says its Residential Fund launched earlier this year aims to use €10mil in private equity and €20mil in non-recourse German Bank financing to take advantage of some of the distressed properties sales which are available in Berlin at present.
Propfund Germany, he says was launched during the recession because of the great potential to make profit when others are sleeping and waiting for better times for investments. The solid German regulated market place between the banks and the strong rental market gives us a very conservative fundamental for a high secured investment with a lot of excellent exit strategies.
What is the background to your company?
EURIX Group is a full service investment boutique which we set up in 1996. We started to sell properties in Berlin to private investors, focused all the time only on the Berlin market place. Together with big non performing loan traders EURIX was responsible to make due diligence from the sell point of view and got access to a lot big deals for sale. The strategy in our group is focused to offer all service through one hand to have everything under control and to be able to react, if necessary as fast as possible. Today the group consists of property management, mortgage broker, real estate broker and asset dealer to deal with German agency networks.
Who are your service providers?
We have built a group of partners from the most expierenced organizations in Berlin. Our tax advisor is CT Commercial Treuhand, our law firm is Dr. Breithaupt Solicitors and Shareholder management will be organized by us. We also have partnerships with large national and international networks of real estate brokers and financial advisors.
Have you had any recent launches?
We’re in the placement phase of PropFund Residential through the end of this year. The fund is expecting to raise a total of €10mil in private equity before the end of this year and acquire in excess of €30mil in residential property.
How and where do you distribute the fund? What is the profile of your targeted client base?
The fund is primarily targeting investors in Germany, UK, Ireland, Netherland and Spain. We are directly involved in taking this opportunity to market, as well as dealing with a large network of investment advisers as well as private equity companies.
How do you generate ideas for your fund?
The opportunities in Germany, especially Berlin speak for themselves. After visiting Berlin, everybody falls in love (with the city of course). And once they obtain all the information regarding the real estate market most of investors are amazed that Berlinproperty prices are still far away below all other European capitals. And remember Berlin is the capital of Germany and still the cheapest place to live. What do you think, how long will this remain? Our prospective as always is based on an increase in the rental market without any spectacular capital appreciation.
What is your approach to managing risk?
We have taken a hard stance against potential credit risk by taking only long term mortgage contracts where the average rents covered the costs of the loan. On the top, after all costs the property must produce a profit which allows us to pay a dividend to the shareholders. We fix the time period for the interest over 10 years, the equal period regarding our holding strategy. We avoid to purchase properties we have to refurbish, that has to be done. As a rental income we look at a long term safety rental income with less than 15% vacancy. All properties we acquire for the fund will undertake a full due diligence. This strategy is very unique to Germany as it is a rental based strategy, which is the least risky of all investment strategies.
What are your performance expectations?
We expect that private equity shareholders will get 7-10% each year as a payout, which represents the profit on the rental income the fund makes each year. But of course, there is capital appreciation to consider in addition to the fact that a significant portion of the mortgage will be repaid over the term of the investment. Overall we expect shareholders to enjoy up to 272% return on investment over 10 years investment.
What opportunities are you looking at right now?
We are currently in the process of acquiring 220 units in five different locations in Berlin. Each of these projects are being purchased directly from financial institutions at least 20% below market value. Nearly all apartments are rented with long term tenants generating an average yield of over 9%. We expect to have this acquisition finished by the end of August.
What events do you expect to see in your sector in the year ahead?
We expect continued sustainable growth in both residential property prices and rental income. We are also seeing an increase in investor confidence from both inside Germany and internationally. We expect this trend to continue for the year ahead.
How will these developments impact on your own portfolio?
This is exactly why we have created the fund – to take advantage of a solid rental market place in Germany. Germany’s economy is still one of the strongest in Europe. The potential for significant rental increases is always here especially in Berlin. This is helped by its strategic geography – nicely placed between the markets of west and east.
What differentiates you from other managers in your sector?
I built up the whole business together with my partner over the last 16 years from zero to the current level. We know exactly what we want and are not interested to gain a short term profit for ourselves. We feel, together with all our shareholders, our main target is to create above average wealth for our shareholders. Only if the exit strategy is successful we have earned money at the end.
Do you have any plans for further product launches in the near future?
Yes. We are 100 per cent focused on this fund for the moment, but there are so many opportunities different business fields on the German marketplace. We have planned a series of Property Funds for the next 5 years for different locations and different investments with different exit strategies.
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Fund Manager Interview
Last updated: January 17, 2011Marco Knoblauch, Fund Manager for Propfund Germany 1 GmbH & Co. KG says its Residential Fund launched earlier this year aims to use €10mil in private equity and €20mil in non-recourse German Bank financing to take advantage of some of the distressed properties sales which are available in Berlin at present.
Propfund Germany, he says was launched during the recession because of the great potential to make profit when others are sleeping and waiting for better times for investments. The solid German regulated market place between the banks and the strong rental market gives us a very conservative fundamental for a high secured investment with a lot of excellent exit strategies.
What is the background to your company?
EURIX Group is a full service investment boutique which we set up in 1996. We started to sell properties in Berlin to private investors, focused all the time only on the Berlin market place. Together with big non performing loan traders EURIX was responsible to make due diligence from the sell point of view and got access to a lot big deals for sale. The strategy in our group is focused to offer all service through one hand to have everything under control and to be able to react, if necessary as fast as possible. Today the group consists of property management, mortgage broker, real estate broker and asset dealer to deal with German agency networks.
Who are your service providers?
We have built a group of partners from the most expierenced organizations in Berlin. Our tax advisor is CT Commercial Treuhand, our law firm is Dr. Breithaupt Solicitors and Shareholder management will be organized by us. We also have partnerships with large national and international networks of real estate brokers and financial advisors.
Have you had any recent launches?
We’re in the placement phase of PropFund Residential through the end of this year. The fund is expecting to raise a total of €10mil in private equity before the end of this year and acquire in excess of €30mil in residential property.
How and where do you distribute the fund? What is the profile of your targeted client base?
The fund is primarily targeting investors in Germany, UK, Ireland, Netherland and Spain. We are directly involved in taking this opportunity to market, as well as dealing with a large network of investment advisers as well as private equity companies.
How do you generate ideas for your fund?
The opportunities in Germany, especially Berlin speak for themselves. After visiting Berlin, everybody falls in love (with the city of course). And once they obtain all the information regarding the real estate market most of investors are amazed that Berlinproperty prices are still far away below all other European capitals. And remember Berlin is the capital of Germany and still the cheapest place to live. What do you think, how long will this remain? Our prospective as always is based on an increase in the rental market without any spectacular capital appreciation.
What is your approach to managing risk?
We have taken a hard stance against potential credit risk by taking only long term mortgage contracts where the average rents covered the costs of the loan. On the top, after all costs the property must produce a profit which allows us to pay a dividend to the shareholders. We fix the time period for the interest over 10 years, the equal period regarding our holding strategy. We avoid to purchase properties we have to refurbish, that has to be done. As a rental income we look at a long term safety rental income with less than 15% vacancy. All properties we acquire for the fund will undertake a full due diligence. This strategy is very unique to Germany as it is a rental based strategy, which is the least risky of all investment strategies.
What are your performance expectations?
We expect that private equity shareholders will get 7-10% each year as a payout, which represents the profit on the rental income the fund makes each year. But of course, there is capital appreciation to consider in addition to the fact that a significant portion of the mortgage will be repaid over the term of the investment. Overall we expect shareholders to enjoy up to 272% return on investment over 10 years investment.
What opportunities are you looking at right now?
We are currently in the process of acquiring 220 units in five different locations in Berlin. Each of these projects are being purchased directly from financial institutions at least 20% below market value. Nearly all apartments are rented with long term tenants generating an average yield of over 9%. We expect to have this acquisition finished by the end of August.
What events do you expect to see in your sector in the year ahead?
We expect continued sustainable growth in both residential property prices and rental income. We are also seeing an increase in investor confidence from both inside Germany and internationally. We expect this trend to continue for the year ahead.
How will these developments impact on your own portfolio?
This is exactly why we have created the fund – to take advantage of a solid rental market place in Germany. Germany’s economy is still one of the strongest in Europe. The potential for significant rental increases is always here especially in Berlin. This is helped by its strategic geography – nicely placed between the markets of west and east.
What differentiates you from other managers in your sector?
I built up the whole business together with my partner over the last 16 years from zero to the current level. We know exactly what we want and are not interested to gain a short term profit for ourselves. We feel, together with all our shareholders, our main target is to create above average wealth for our shareholders. Only if the exit strategy is successful we have earned money at the end.
Do you have any plans for further product launches in the near future?
Yes. We are 100 per cent focused on this fund for the moment, but there are so many opportunities different business fields on the German marketplace. We have planned a series of Property Funds for the next 5 years for different locations and different investments with different exit strategies.
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