Pirelli RE is entering a partnership with HSH Nordbank to carry out asset management activities in Germany through HSH Real Estate AG; one of the Germany's top banks in the real estate sector (capital transactions, project development, real estate services and fund initiator and management).
Asset management involves identifying investment opportunities in the various real estate products, constructing new buildings as part of development projects and strategically managing portfolios acquired, coordinating the specialized service activities for the purposes of maximizing the value of assets acquired and then selling them in the long term.
HSH Real Estate AG has bought the 20% of Pirelli RE Asset Management GmbH which was recently created with the portfolio and asset management mandates of ex DGAG and of BauBeCon, based on a total valuation of roughly 70 mln., from Pirelli RE for 14 mln. The company has over 3.2 bln. (book value) in real estate under management, of which some 3 bln. in residential assets (approximately 50,000 units, of which over 47,000 owned by the Pirelli RE-RREEF joint venture) and around 240 mln. in retail and office assets. Annual revenues from that business are estimated at some 9 mln., with approximately 4 mln. in EBIT.
The residential assets under management are mostly located in Northern Germany, in Lübeck, Berlin, Kiel, Hannover and Hamburg; the average entry yield is roughly 6.4%, annual rental income totals over 170 mln. and the average vacancy rate is 6.1%. The commercial properties are located in the cities of Frankfurt, Hamburg and Kiel; the average entry yield is currently roughly 6.8%, annual rental income totals over 16 million and the average vacancy rate is currently approx. 10%.
Through its partnership with HSH Nordbank - with some 200 bln. in total assets and a prime corporate and private client portfolio - the Pirelli RE Group is intending to become leader in the asset management sector also in Germany, relying on its extensive knowhow in the various types of real estate product and on the quality of service, paying the utmost attention to profitability.
The company owned by Pirelli RE (80%) and HSH Real Estate AG (20%) intends to provide asset management services to part-owned as well as third-party portfolios. In the Central-Eastern European markets, the asset management business is very fragmented, there is no one who operates in the all area and so it is possible to embark on a process of sector consolidation, offering very high growth potential to the principal players.
Pirelli RE has thus perfected also in Germany its business model already applied in Poland, Bulgaria and Romania which is based on the participation in the asset management business of a major local financial partner with a minority stake.
The firm of Freshfields Bruckhaus Deringer has acted as Pirelli RE's legal advisor.
Source: Pirelli RE