DIFA to boost international exposure of retail funds
DIFA to boost international exposure of retail funds
- Planned investment in growth markets to enhance performance
- Shopping centres and business hotels to have greater weighting in DIFA portfolio
Hamburg-based DIFA Deutsche Immobilien Fonds AG remains committed to a policy of regional diversification outside Germany. At the same time the company - which is part of the Union Investment Group - will continue to spread its retail fund risk across different sectors through increased investment in hotel properties and retail outlets, as well as by entering the logistics market. According to the DIFA Management Board, the focus of investment activity between now and 2008 will be on high-volume markets – specifically on office properties with existing tenants in downtown locations, high-quality business hotels and shopping centres. The acquisition of two major shopping centres in Hamburg at the end of last year was followed in recent weeks by the purchase of three established shopping centres in Remscheid, Braunschweig and Darmstadt. Further shopping centres will be added to the portfolio over the course of the year. The DIFA Management Board points out that well positioned, professionally managed shopping centres are very different to small-scale retail operations and make an above-average contribution to the performance of the DIFA funds.
The DIFA Management Board also announced that between 2003 and 2008 DIFA intends to channel around 25 per cent of new investment into the German market, approximately 55 per cent into other European markets and 20 per cent into the USA and Asia Pacific. The German Federal Financial Supervisory Authority (BaFin) recently approved the application of the provisions of the Fourth Financial Markets Promotion Act to existing funds, allowing DIFA to gradually increase the proportion of properties in its DIFA-GRUND fund outside the EU/EEA to 66 per cent, and to 95 per cent in 2005.
“In view of the comparatively good prospects and attractive potential returns, particularly in the office markets in Paris, London’s West End and Brussels, DIFA-Fonds Nr. 1 will in future invest more extensively across Europe excluding Germany,” says the DIFA Management Board. The target figure for 2008 was put at around 40 per cent, while the proportion of property in Germany will gradually be lowered to 60 per cent, down from 73 per cent at present. Like with DIFA-GRUND, the company plans to reduce the portfolio weighting in office premises in favour of more retail space. The first venture in this product category outside Germany will be realised through co-investments, with safeguards on the management side provided by working with partners who have a strong market presence and local experience.
International focus now includes Central Europe and Australia
The DIFA Management Board also stated the company’s intention of raising the non-German exposure of DIFA-GRUND, which is already being positioned as an international fund, to 75 per cent, compared with a current level of 50 per cent. Based on anticipated net capital inflows, over the next few years the fund will mainly grow in Paris and London, while also adding to its holdings in Madrid and Barcelona. Furthermore, the Central European office markets of Prague, Warsaw and Budapest are high on DIFA’s shopping list, with the Management Board seeing exciting opportunities for a high initial rate of net return and above-average appreciation. Already active in Seattle, Washington D.C. and Atlanta, the company plans to increase its DIFA-GRUND holdings significantly in the US and include Sydney in its successful overseas investment strategy. “By setting up a New York office and forming partnerships with companies such as Metzler North America, the conditions have been created for exploring opportunities for the DIFA-GRUND fund in property markets outside Europe,” says the Board. The plan is to have a quarter of DIFA-GRUND’s assets invested in overseas property by 2008. Within Germany, DIFA aims to tap into the high development potential of Munich’s office space market, as well as the previously underweight office sectors in Cologne and several smaller cities.
Modest performance expected until 2004
DIFA expects its diversification into the retail sector and its greater international focus to have a significant impact on the performance of both funds. “Our international properties currently enjoy higher occupancy rates than our German ones. Although globalisation and the introduction of the euro are bringing markets more into line, the situation in other countries continues to differ, and there are many interesting opportunities out there,” continued the spokesperson.
Since these strategies will only start to deliver results in the medium term, performance is expected to be subdued for some time to come. In line with the industry as a whole, the DIFA Management Board anticipates a drop in year-on-year performance for both retail funds. The forecast for the end of 2003 is 3 per cent for DIFA-Fonds Nr. 1 and just under 4 per cent for DIFA-GRUND. According to the DIFA Management Board, “open-ended real estate funds are being hit by the current economic downturn and the associated rise in vacancies and loss of rental income. Depending on when the economy begins to recover, major improvements are unlikely before the start of 2005 at the earliest.” In view of the present climate, the DIFA Management Board attaches even greater importance to maximising potential returns by boosting customer loyalty. DIFA has long been committed to providing customers with building management services delivered at regional level, a fact which is also reflected in the positive results of tenant surveys conducted by Infratest. Other factors include innovative letting concepts that have helped DIFA let over 100,000 square metres of space in the current year despite the challenging market conditions.
Press contact
DIFA Deutsche Immobilien Fonds AG
PR/Communication
Fabian Hellbusch
Caffamacherreihe 8, 20355 Hamburg, Germany
Tel: +49 40 3491 9160, Fax: +49 40 3491 9190
Internet: www.difa.de
E-mail: fabian.hellbusch@difa.de
