DIFA acquires first CityQuartier in Munich

DIFA acquires first CityQuartier in Munich

By purchasing the “Fünf Höfe” (“Five Courtyards”) complex in Munich’s city centre, Hamburg-based DIFA Deutsche Immobilien Fonds AG has added a further CityQuartier development to the portfolio of its DIFA-GRUND real estate fund. Comprising some 48,000 square metres, the property was acquired from HypoVereinsbank. Around 15,000 square metres of space is devoted to retail, bars and restaurants but the real estate ensemble also includes some 24,400 square metres of office space, residential apartments covering approx. 3,200 square metres and the gallery of the Hypo Foundation for Culture (likewise 3,200 square metres). “With this user base the Fünf Höfe complex is an excellent fit with DIFA’s investment strategy, which focuses on cohesive developments in central locations that combine a range of uses,” says Dr. Frank Billand, the member of the DIFA Management Board whose responsibilities include real estate acquisitions and sales in Germany.

CityQuartier complexes are part of a specific product line developed by DIFA which has a strict focus on people’s needs. Through a mix of uses, CityQuartiers help revitalise and enhance the appeal of urban centres. These ensembles are designed for living, working, shopping, enjoying new experiences and relaxing, with an emphasis on convenience, service and quality.

DIFA has existing CityQuartier developments on the Kurfürstendamm in Berlin, in the shape of the Neues Kranzler Eck complex, as well as the Frankfurter Welle (Frankfurt Wave) directly adjacent to the opera house in Frankfurt. DomAquarée, a major new CityQuartier, is currently under construction in central Berlin, just across the river from the cathedral. The Trocadéro CityQuartier in Paris and Fünf Höfe take DIFA’s holdings of this kind of property to five.

Fünf Höfe – a prime property in downtown Munich

The Fünf Höfe complex enjoys an outstanding central location close to Munich Town Hall, the Frauenkirche (Cathedral Church of Our Lady), the National Theatre and the Bayerischer Hof hotel. Dr. Billand on the rationale behind this step: “The Fünf Höfe is an example of how DIFA is investing in inner-city locations which retain their value in a tough economic environment and which we know from experience are the first to benefit from an upturn in the market.”

The Fünf Höfe complex was completely rebuilt between 1999 and 2003, and features an attractive mix of tenants as well as a high occupancy rate. The 54 retail units are let to big-name tenants such as Armani, Zara and Ludwig Beck.

Munich a preferred DIFA investment location

The Fünf Höfe acquisition demonstrates once again that the German property market still offers attractive investment opportunities, while boosting DIFA’s portfolio as the specialist investment institution within the Union Investment Group to 11 properties and projects in Munich and the surrounding area. “Munich is a key investment location for DIFA, and we have great confidence in this market,” declares Dr. Billand.

DIFA is also driving forward what is currently Munich’s biggest urban development project, the “StadtQuartier Riem Arcaden in der Messestadt”, investing more than 500 million euros for DIFA Fund No. 1. Other DIFA properties in Munich include the Hilton Munich City hotel, Pallas House in the city’s sought-after Schwabing district and the IT-Port project development in the Unterschleißheim industrial zone.

DIFA systematically expands retail exposure

DIFA has long pursued a strategy of expanding the exposure of both DIFA Fund No. 1 and DIFA-GRUND to the retail sector. “Shopping centres represent a good opportunity to diversify and spread portfolio risk, while offering the prospect of good returns if care is taken to choose established locations with excellent transport links,” says Dr. Billand.

DIFA’s acquisitions over the past year include the Allee-Center in Remscheid, CityPoint in Braunschweig, Wandsbek Quarree in Hamburg and the Norderstedt “Herold-Center” on the outskirts of Hamburg. As far back as 2000, contracts were signed to purchase the “Spandau Arcaden” centre in Berlin.

Outlook for the Munich property market

Top rents remained largely stable in 2003 despite Munich’s rising vacancy rate and a fall-off in overall demand. Although top rents are under pressure in the Bavarian capital, they are not expected to fall as sharply as in other cities such as Frankfurt. For Dr. Billand, “city centres remain the prime location for the property market long-term.” Available space continues to be limited by the relative lack of scope for new development.