Why investing now in European commercial real estate makes sense…
Speed and transaction agility are a necessity in the property investment sector and a crucial driver of competitive advantage.
As investor's demand for income returns and capital growth increases, so does the need for ÆRIUM's market leadership in the 5 to 25 million euro-property segment to source the best deals for its ventures.
Real estate is now an attractive asset class
With the increased volatility and uncertain returns in the global equity and fixed income markets today, private and institutional investors seeking global diversification benefits are attracted to the relative stability of investment performance in Western Europe real estate assets.
Since the value of a share or unit in ÆRIUM is determined once a year based on a full portfolio appraisal, the investment in ÆRIUM is insulated from the daily re-pricing and market swings that introduce high volatility to investments in stocks and bonds.
Interest rates are at historically low levels
The European real estate industry is currently cycling through a complete recapitalization precipitated by new capital inflows from mortgage-backed securities, German pension funds, and U.S . investment banks. As interest rates are expected to remain at historically low levels across Europe, ÆRIUM will use non recourse debt of 75 per cent to 85 per cent loan-to-value to increase the cash flow.
Europe is now fertile ground for investors
Investment opportunities in Europe are particularly promising as a result of several factors:
The continuing expansion of the European Union;
The common currency platform which facilitates cross-border acquisitions, and enhances the transparency and stability in real estate markets;
Regulatory reform and the harmonization of tax and regulatory issues across European markets;
The expectation that an economic recovery expected in 2004 will spur larger demand for property space; and corporate Europe has shown an increasing interest toward outsourcing property ownership.
Sale-leaseback transactions are on the rise
More owner-occupiers are looking at new ways to raise cash and refocus balance sheet assets on core business activities.
One of the most significant trends defining the commercial marketplace in Europe now is the growing popularity of sale-leaseback transactions which provides companies with 100 per cent of the value of its real estate, generates cash for business priorities, and provides the tenant company with complete control of its facility.
For investors, the sale-leaseback transaction affords significant income-enhancing and risk mitigating benefits. Since each property is initially leased to and occupied by a single tenant, analysis of both property fundamentals and tenant creditworthiness is conducted simultaneously before commitment eliminating both development and rent-up risk.
This type of transaction provides investors with a dependable rising income stream secured by corporate guarantees and ownership of critical operating assets.
Today, Europe's commercial real estate is currently value at £3.7 trillion and, with 67 per cent of this market controlled by owner-occupiers, the growing popularity of sale-leaseback transactions represents an enormous reservoir of opportunity for investors