Quality rather than quantity

The debate about the need for more transparency in the real estate listed sector is back in the Germany. In principle there is nothing bad about the requirement for more transparency. I hope that alstria has in the past demonstrated many times its willingness to provide the market with the right set of information at the right time.

There is in my opinion a dangerous amalgam between transparency and throwing unsorted information to investors. I make a big difference between being transparent and publishing each and every data available in a company. Being transparent is not equivalent to ticking each box of a list of information that needs to be published by a company. Transparency is a dynamic and subjective notion. It is about disclosing the right information at the right time and in a way that is understandable by an investor. It is a judgment call.

The two fridges syndrome

BREEAM, LEED, HQE or DGNB. Real estate companies and real estate investors should get familiar with these logos and names, as these are the national trademarks for green building respectively in the UK (and international), US (and rest of the world), France, and Germany.

These standards will usually provide a certificate (which can be silver, gold or platinum…) by looking at the building conception and technique and compare it to a “best in class” technology in terms of, amongst others, resource consumption and greenhouse gas emissions.

Will Aristote save the real estate finance?

In the last 12 months we had numerous questions of investors on what is the Pfandbrief market (the German cover bond market) and how does this market works. I happened to run into an academic study that is a good introduction to the instrument. It is published on the web site of the VdP (Association of German Pfandbrief Banks). The study is dated February 2009, and is called “Refinancing Real Estate Loans – Lessons to be Learned from the Subprime Crisis” (full study can be downloaded following this link).

Unexpected growth

It is not unusual to use approximations for the total area of a real estate asset. Different countries use different measurement rules, and different real estate professionals measure different things (built area, lettable area, usable area...). I do not recall having ever seen a building where everyone agrees on the total area (although it might look odd, but this is also true in some instance for the number of parking spaces). It is not unusal in that respect that following a remeasurement of a property, the total area grows or shrinks by plus or minus 2 to 3% (that is the reason why real estate companies always says that their portfolio represents "around" x sqm).

Back to the Future

Michael J. Fox driving his DeLorean back and forth in the past and in the future, riding his skateboard, listening to Huey Lewis and the News singing the “Power of Love” was one of my favorite movies. I spent an awful lot of time looking at the VHS video (for those who are younger than 25, VHS tapes were big black boxes with movies of bad quality which you could watch on TV, and TVs at that time were also large boxes with a small screens).

Evolution

Real Estate Investment Trust or REIT, is a global trademark which started in the US in the 1960’s, and is now spread across the globe. When a company define itself as a REIT, it mean that it adhere to a number of simple concept. Its is usually a listed company, its business must be real estate investment it is tax transparent, and it pays most of its profit as dividend. Although the local legislation differs here and there, those are the main characteristic of REIT worldwide.

Flat Lines

The new value of the IPD/alstria DMX index which measures the reversion potential of German office rents shows for the second consecutive year that, on average, there is little reversion to be expected in the German rental market. (Full IPD study and result can be found here).

This does not come as a surprise to me and hopefully will not surprise any of the investors we are used to speak to, as this is one of the base case assumptions we have been working on since inception.

Qui va piano va sano

A few weeks ago, following our annual press conference, we got this interesting question from a real estate equity sales desk: “I have one particular question on current disposal talks. If pricing is not very much of an issue and the buyers are mostly equity buyers and have little constraints regarding the debt financing, what is currently holding up the process?”