Chinese buyers of trophy property assets courted for European shares
Property owners banking on a market recovery are looking to sell stakes to Chinese playerswho have been snapping uptrophy assets
Europe's top property owners are increasing efforts to court Asian investors to buy their shares following the latter's spending spree on major physical trophy assets in the past two years.
These players are looking at acquiring smaller rivals to increase their market share and reshape Europe's real estate market on expectations of an economic recovery.
Their funding demands are receiving strong interest from Asian investors, who spent US$8.6 billion on cross-border property deals in the first quarter of this year, with almost a third of that in Europe, data from global consultancy CBRE showed.
"There is a lot of interest [in private deals]," said Scott Peterman, a partner of global law firm Jones Day, who is helping to raise US$1 billion from Chinese institutions to invest exclusively in Europe.
Buying stakes in a publicly listed real estate company, such as a reit, "is not a bad idea because valuations are low now", Peterman told the South China Morning Post.
Asian investors, particularly those from China, have been on a global buying spree for trophy assets, from hotels and office towers to shopping malls. They have strong interest in Europe given the weak euro. For example, China's No1 insurer China Life Insurance last year bought 10 Upper Bank Street, a skyscraper in London's Canary Wharf area, in its first foray into the European real estate market.
Thomas Zinnocker, a deputy chief executive of Germany's largest publicly traded home owner Deutsche Annington Immobilien, said: "The door of interest has opened."
Zinnocker and a few senior executives from other European property firms are on an Asian tour this week, organised by the European Public Real Estate Association. They will meet investors in Beijing and Shanghai to discuss their plans for the next few years and see if any are interested in buying stakes.
Zinnocker told the Post there were a few options, including an opportunity to participate in the company's €2.25 billion (HK$19.6 billion) rights issue, which will close next Tuesday.
If that is too tight, another alternative is for Deutsche Annington, which owns 370,000 homes for rent across Germany, to issue new shares through a private placement, or for Asian investors to buy existing shares on the secondary market.
The company offers a 7 to 8 per cent share return, including a dividend yield of 3 to 4 per cent.
"It's not a double-digit wow thing. But for double digit, you have to risk more," Zinnocker said. "Everything I know about China is that you have to take your time, think it through, develop a trustworthy relationship, and then it will be executed."
Deutsche Annington has been expanding quickly since an initial public offering in 2013 and has made five acquisitions in the past 18 months, including a €3.9 billion deal to take over the sector's No3 player Gagfah in Germany's largest ever property acquisition.
Peterman said Chinese investors had limited experience in Europe, where markets were more protectionist than the United States.
Other deal advisers are worried about rising competition, as capital from elsewhere around the world is also seeing opportunities amid quantitative easing in the euro zone.
David Brush, the chief investment officer of Spanish real estate investment trust Merlin Properties, said there was a big rotation of North American capital out of its own region to Europe.
Brush said 80 per cent of the capital base of Merlin Properties, which listed in June last year, was from North America, while it has only one Asian investor.