Cordea Savills plans German property expansion through M&A
International property fund manager Cordea Savills is close to acquiring an unidentified German real estate manager, in a move that would more than double its German holdings from about €400m to €900bn.
If the acquisition completes successfully, as expected, Cordea Savills would also grow its presence in Germany from an office in Munich led by Thomas Guetle, to include a network in Hamburg, Stuttgart, and Duesseldorf as well.
Justin O’Connor (pictured), Cordea Savills CEO, said it was important to be present in different regions in Germany because different German cities can have quite different property sub-markets.
Germany has proved popular with end-investors recently, as one of Cordea Savills’ rivals raised an extra €90m from its clients for a country-specific fund focused on retail warehouses. In assessing Europe property many point to German sectors as less affected by the eurozone crisis hitting property in Spain and Portugal and Ireland, for example.
O’Connor expects consolidation of the property manager community generally, and notes parent company Savills has net cash balances.
The ‘starting-gun’ to property management M&A in Germany was arguably fired recently by Deutsche Bank, when it included its RREEF alternatives arm in a strategic review and possible sale of most of its asset management operations.
Cordea Savills runs about €3.3bn of hard property assets in Europe, and O’Connor says, “we are looking at bolt-on acquisitions rather than platforms. Groups need to reach critical mass, because when you do you are offered much bigger deals, and you can achieve economies of scale you cannot get with lower funds under management.
“When adding assets you do not have to put on extra compliance officers when you run €10bn compared to €1bn, for example.
“A lot of businesses are ex-growth, and a lot of the smaller players do not seem to have much of a future. They may have products, but the question is how will they grow. If you have closed-ended funds it can be difficult to raise money.”