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Interview with Foncière des Régions deputy CEO, Olivier Estève : Is the German market the new Eldorado for property investments in Europe?

olivier_esteve_bloc_biographie2Foncière des Régions (FDR) is one of the largest European property companies, with assets worth more than 19 billion euros. The company is mainly active in the office, hotel and residential markets in a number of European countries including France, Germany, Italy and Spain. Here we talk to Olivier about what’s driving the group’s recent activity in Germany.

How long is it since FDR started investing in Germany?

The group started to invest in Germany in 2006, initially just in residential property. The starting point was the purchase of a portfolio of former ThyssenKrupp houses from Morgan Stanley, somewhat along the model that we had developed in France in this market.
Originally, our investment was prompted by our analysis of the German market, which seemed to offer a very positive outlook in terms of the economic and demographic fundamentals, with strong potential for growth in rents and residential values.
Right from the start FDR saw this as a long-term investment, with the development of a team on the spot which now counts more than 500 staff.

Recently your investments in Germany have accelerated, with new acquisitions in residential but also in the hotel sector. Why is that?

The past ten years have confirmed our initial analysis of the potential of the German market. The fundamentals are there. There is a definite economic dynamism coupled with steady growth. We have also seen demographic growth in the cities we have targeted, due to the immigration of skilled labour from elsewhere in Europe who are young graduates mainly, plus strong internal migration, as we have seen in Berlin. Together with a growing interest from tourists and businesses, there is a real market depth, with very high transaction volumes. In fact, Germany was the leading market in continental Europe for transactions in 2016.

Against that background, we have decided to continue to invest in two markets: residential and, more recently, the hotel sector, supporting our customers or developing new partnerships.
For housing, we are concentrating our investments in areas with strong potential for growth in rents and values, like Berlin, which now represents 55% of our investments, as compared with 0% a few years back, or Hamburg. In total we manage 42,000 housing units, with an overall investment in the order of 4 billion euros.
In the hotel business, it was a matter of following our customers in Europe, which naturally led us to invest in Germany, a growing market with high potential due to the economic and tourist attraction of some of its regions. Today we have more than 1.5 billion euros under management in Germany.

Do you think the German market will continue to offer investment potential in the coming years?

Our investments are always long-term. They are not speculative. The long-term fundamentals in Germany continue to be very positive, with impacts that will benefit both housing and the hotel sector. The market is also very healthy in other areas, such as logistics, where we are not currently present. So we are very optimistic about this country.
At the moment, the market is very competitive, with a significant investor presence. In my view, you need to be established locally, which we are, and to know the market well, which enables us to be selective in our acquisitions policy and to create value subsequently with our management teams working on the spot. That also enables us to work with innovative or significant players like Meininger or Motel One in the hotel sector.

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Is the German market the new Eldorado for Real Estate in Europe?

Gilles Magnan

Partner - Financial Services

Following the start of his career with AGF in France and then Poland, Gilles joined Mazars in 1992 and became a Partner in 2003. After leading the global Financial Services practice and French Real Estate sector for ten years, he currently serves as the Deputy Head of Business Development for large and listed companies worldwide. A chartered accountant and auditor, Gilles is a specialist in auditing large groups, particularly in the Insurance and Real Estate sectors. He is the Statutory Auditor of AXA, Klépierre and Foncières des Régions. He also leads advisory assignments (due diligence, accounting organization, Solvency 2, internal control…) in France and abroad. He was a professor at the French National School of Insurance (L’École Nationale d’Assurances), most notably a faculty member of their MBA program and Centre for Advanced Insurance Studies (Centre des Hautes Etudes d’Assurances). He is co-editor of the book “Managing an Insurance Company” which was published in...
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