DEGI, part of Aberdeen Property Investors, announced that it invested a total of 1.7 billion for its public property funds in 2008 at its annual press conference in Frankfurt am Main, Germany.
More new acquisitions planned in 2009
The property asset manager is planning new acquisitions in anticipation of further inflows with resources already earmarked, "We are in a good position to take advantage of new investment opportunities in the current markets, which are beginning to offer attractive values", announced Bärbel Schomberg, CEO of DEGI.
Schomberg added that since the end of 2007 DEGI has taken advantage of price corrections in several property markets offering the potential for significantly more attractive returns, The group of possible target countries is being widened gradually to include the United Kingdom, France and Germany, amongst others.
Good letting situation creates a solid foundation for income
As of 28 February 2009, the public property funds under management had the following letting ratios (previous year's figure in brackets): DEGI EUROPA 93.3 % (93.4 %), DEGI INTERNATIONAL 98.0 % (97.4 %), DEGI GLOBAL BUSINESS 97.3 % (99.1 %), DEGI GERMAN BUSINESS 97.4 % (97.1 %), DEGI EUROPE RETAIL 100 % (100 %).
More space rented, more tenancy agreements in force
The Company has substantially expanded its letting base as a result of intensive letting activities and new investments. On 28 February 2009, the funds' rented space totaled approximately 1.62 million m² (previous year: 1.16 million m²), with approximately 1,800 tenancy agreements (previous year: 1,400). In 2008, around 100,000 m² of space was let and re-let. Since the economic deterioration in September 2008, approximately 30,000 m² of rented space has been let and re-let to new and existing tenants.
Stable returns for DEGI's funds despite the turbulent markets
The one-year performance of DEGI's funds is holding up well. As at 28 February 2009 (previous year's performance in brackets) DEGI EUROPA was 4.4 % (4.7 %), DEGI INTERNATIONAL was 4.6 % (4.9 %), DEGI GLOBAL BUSINESS was 5.3 % (5.4 %), DEGI GERMAN BUSINESS was 5.0 % (5.0 %) and DEGI EUROPE RETAIL was 5.0 % (4.5 %).
Strong position of DEGI's funds compared to other asset classes
DEGI's funds, with returns of between 4.4 % and 5.3 %, have performed substantially better than other investment fund categories and fixed-interest-rate securities. According to BVI statistics, as at 31 December 2008 international equity funds were -40.4 %, international bond funds were -0.4 % and euro money market funds were only 1.1 % with appreciation on a one-year comparison. Equally, German government bonds are being significantly outperformed by DEGI's funds. Currently, the return on 10-year German government bonds is 2.95 % (as at 6 March 2009).
Management sees good sales chances in 2009
In light of continuing market volatility, severe fluctuations on weak stock markets and with bonds yields at an historic low, DEGI's management anticipates a high level of interest amongst investors in security-oriented forms of investment and therefore good sales opportunities for public property funds. This is particularly applicable to DEGI's funds, which pursue a relatively low risk investment policy (its core investment strategy) that targets fully let portfolio properties, new acquisitions in prime locations and high-quality properties with low levels of debt.
Schomberg commented, "In times of uncertainty, reliable forms of investment tend to do particularly well. People are looking for consistent returns with transparent, comprehensible forms of investment. This is precisely what our funds offer."
She added, "Our funds will also be affected by the economic downturn over the coming year. However we anticipate returns to continue to be above the level of fixed-interest comparable investments, thanks to our long-term tenancy agreements already in place."
DEGI study: Germany's property market in 2008
According to the latest DEGI RESEARCH Report 'Market Outlook Germany', the German office and retail markets have held up robustly throughout the market turbulence.
In 2008, approximately 3.3 million m² of office space changed hands in German centers. This figure constitutes the third-best result in the last 10 years and is only slightly below the record level reached in 2007. As a result of this high demand, vacancies have fallen by 4.6 %, resulting in a 2.6 % rise in peak rentals.
In line with the predicted economic recovery in 2010, an upturn in the property markets with rising rentals is anticipated from 2011after an inevitable time-lag. The outlook for 2009 is for more vacant properties and a falling level of rentals.
Total investment volume in the property investment market in 2008 was €25.4 billion. Following the record years of 2005 to 2007, this represented a significant normalization of turnover, since the transaction volume now corresponds to the 10-year average again. In comparison to 2007, turnover was down by approximately 60 %.
The reduced demand for property investments is being manifested in rising peak returns. In the main investment centers, the peak returns have increased by an average of 47 basis points to 5.6 %, which corresponds to the average figure over the past 14 years.
DEGI’s location scoring scheme analyses the growth chances and risks of 67 German A- and B-locations. The three top-ranking office locations were Munich, Stuttgart and Cologne. It also concluded that there are five B-locations among the top 10. Besides Bonn, these are Mannheim, Aachen, Heidelberg and Karlsruhe.