Investing in German Real Estate

Prof. Dr Florian Hackelberg is Professor of Real Estate Economics and Management at the HAWK University of Applied Sciences and Arts in Holzminden, Germany. Before that, he was a senior manager in the Real Estate Transactions team at PricewaterhouseCoopers, based in Berlin and Shanghai. After studying Civil Engineering and Management in Germany, England and China, Hackelberg received a PhD from the Technical University of Berlin. He also holds a master's degree in International Relations from the University of Cambridge, where he was awarded the Madingley thesis prize. Hackelberg is a Professional Member of the Royal Institution of Chartered Surveyors (MRICS), a member of the RICS Professional Group Valuation and a member of the German Society of Property Researchers (gif). He is also a member of the Höxter committee of valuation experts (Gutachterausschuss). He has written and co-written numerous books and articles on various real estate topics.

Dirk Hennig is a transactions partner with PricewaterhouseCoopers, focusing on real estate advisory services. He has over 25 years of hands-on consulting and deals experience from serving multinational clients with their real estate investments in Germany. He has worked in PwC offices in Berlin, Düsseldorf and New York. Hennig has a master's degree in Engineering from the University of Dresden, and the title of Expert for International Valuation of Real Estate from European Business School, Oestrich-Winkel. He is a board member of the Federal Association of Publicly Appointed, Sworn and Qualified Experts e.V. (BVS); a member of the German Property Federation (ZIA) working group 'Accounting and Valuation'; and a member of the Tangible Assets Board of the International Valuation Standards Council (IVSC). He was a member of the working group of the Institute of Public Auditors in Germany (IDW) for the publication of the IDW S 10 standard 'Principles for the Valuation of Real Estate'.

Table of Contents

Foreword

Foreword from the Editors

Fundamentals - Basics of the German Real Estate Market

Macroeconomic Structure of the German Real Estate Market

• German Macroeconomic Key Indicators
• Geographic Structure of the German Real Estate Market
• German Real Estate Indicators
• German Real Estate Investment Structure
• Conclusion: Attractiveness and Complexity

Real Estate Investment Trends and Strategy

• Introduction
• Real Estate Investment Strategies
• Deal Sourcing
• Conclusion

Markets - German Real Estate Market Sectors

The Housing Market in Germany

• The Provider Structure in the German Housing Market
• Rental Accommodation in Germany - The Most Common Form of Housing, High Quality and Stable Demand
• Housing Construction in Germany and Demand for New Housing
• German Rent Control
• Price Developments in the Sale of Residential Real Estate
• Conclusion

Investing in German Offices

• Introduction
• Germany Is Not Paris
• Smaller Is Liquid
• GDP Growth Is Not Alone
• Low Yields: Small Margins of Error
• Co-working Revisited
• Sustainability Matters
• The World According to Covid
• Summary

Retail Property Investment Market

• Introduction
• Definition and Types of Retail
• Retail Property Market Structure
• Development of the Retail Property Investment Market
• Challenges for the Retail Sector and Changing Shopping Behaviour
• Summary and Outlook

The Logistics and Industrial Property Investment Market

• Introduction
• Definition and Types of Logistic and Industrial Properties
• The German Logistics Investment Market
• Trends in the Logistics Real Estate Sector
• Summary and Outlook

Hotel Investment Market

• Introduction
• Supply and Demand in the German Hotel Market
• German Hotel Investment Market
• Types of Hotels
• Definitions of the Most Important KPIs for Investors in Hotels
• Hotel-specific KPIs and German Market Characteristics
• Operator Models
• Summary and Outlook
• Hotel Data and Addresses

Nursing Home Investment Market

• Introduction
• Types of Care Provision and Properties in the Senior Housing Segment
• Demographics
• Market and Location Analysis for Nursing Homes
• Structural Requirements for Nursing Homes
• Regulatory Framework
• Consolidation and Concentration in the Nursing Home Operator Market
• Transaction Market and Prime Yield Development
• Opportunities and Risks of this Asset Class
• Summary and Outlook
• Organizations
• Market Reports Databases

Framework - German Regulatory Real Estate Framework

Legal Real Estate Investment Framework

• Introduction
• Accessibility
• Acquisition Structure
• Relevant Legal Aspects for Risk Assessment
• Acquisition Process

Tax Aspects of Real Estate Investments in Germany

• Overview
• Income Tax (Einkommensteuer) and Corporate Income Tax (Körperschaftsteuer)
• Withholding Tax Regime
• Trade Tax (Gewerbesteuer)
• Real Estate Transfer Tax (Grunderwerbsteuer)
• Value-added Tax (Umsatzsteuer)
• Land Tax (Grundsteuer)
• German Anti-hybrid Considerations
• Mandatory Reporting of Cross-border Tax Arrangements
• Tax Summary

Real Estate Accounting

• Introduction
• Components of Accounting and their Functions
• Accounting and Valuation Principles
• Conclusion and Meaningfulness of the Valuations

Real Estate Investment Trust (REITs) in Germany from the Perspective of Investors

• Introduction
• Two Major Types of REIT Investor
• Investors' View on the German REIT
• The German REIT Sector
• Case Study: Hamborner REIT AG

ESG in German Real Estate Investments

• Political and Regulatory Background
• Market Trends and Value Drivers
• Overview of ESG Measurement and Key Performance Indicators (»KPI«)
• Implementation in Investment Processes (ESG due diligence)
• Implementation in Contracts and Legal Documentation

Management - Guidelines for Investing in German Real Estate

Real Estate Mergers & Acquisitions

• Real Estate M&A Processes
• Best Practices

Financing Real Estate in Germany

• Sources of Capital
• Types of Security
• Long-term Debt Financing
• Conclusion

Real Estate Valuation in Germany

• Basis of Valuation
• Valuation Framework in Germany
• Valuation Methodologies
• Fundamentals for Determining the Mortgage Value
• Practical Valuation Aspects to Consider in the Investment Process
• Conclusion
• Real Estate Data and Addresses

Financial Due Diligence in the German Real Estate Market

• Definition, Timing and Goals of FDDs in Real Estate
• Context of FDD Services
• Financial Due Diligence in an Asset Deal - Analysis of the Property Net Operating Income
• Financial Due Diligence in a Share Deal - Supporting the Deal Considerations and SPA
• Conclusion

The Editors and Authors