This year’s halfway figures from the shopping centre-focused, Dutch-headquartered, listed property company Corio revealed that while net rental income was up by 4.3% to €204.4m, and the direct result had risen 1.8% to €136.2m, the portfolio had been revalued downwards by 1.5%, a fall of €104.3m.
Corio is present in France, Germany, Italy, Spain, Portugal and Turkey and negative revaluations occurred across the board. But, surprisingly, the largest reduction occurred in Germany.
The Netherlands portfolio saw an overall decline of €6m, France dipped €8.9m, Italy dropped €1.4m, Turkey fell €9.1m and Spain and Portugal, €27.2m. But in Germany the portfolio fell in value by €51.7m.
Within the past few weeks Jörg Banzhaf has joined the group as CEO of Corio Germany. He comes from Atrium European Real Estate, where he spent a year following a 10-year stint at Hamburg-based ECE. At Corio he replaces Hubertus Kobe, whose departure from Corio was announced in August and was attributed at the time to “[differing] perceptions about the further strategic direction”.
Part of Multi portfolio deal
Some €40.1m of the fall in value of the German portfolio was attributable to a shopping centre in Dresden that is part of a portfolio Corio acquired for €1.2bn from private Dutch company Multi Development in 2010, a move which established Corio’s presence in Germany.
Along with additional property in Spain and Portugal, Corio bought Multi’s 64,500 m2 Centrum Galerie Dresden and the 58,500 m2 Forum Duisberg as operational shopping centres. The package also included five retail developments in Germany including Schloßstraße, Berlin; Quartier an der Stadtmauer, Bamberg; Arneken Galerie, Hildesheim; and another property in Duisburg, Königsgalerie.
“The whole portfolio in Germany is shopping centres that have been on the market only a very short time – all opened between 2009 and this year – so none of the projects really stabilised. My belief is that the projects bought from Multi have all made their way into the market relatively well,” says Banzhaf.
One of Banzhaf’s primary roles on joining Corio is to oversee the investment of €27m which has been allocated to put the Dresden centre back on track.
“Dresden had its problems, that is clear. I think the valuers [DTZ] took the cautious approach. We have reacted and are investing. I believe we have a concept that fits well into the market and into the shopping centre, so my feeling is that the devaluations will quickly be recovered.”
Banzhaf says that the problems with the Dresden project were “conceptual mistakes”. “An anchor tenant at the back was missing, which we will now change, and the customer flow through the centre was not optimal,” he says.
He adds that the changes will also inject more of Corio’s philosophy into the project. “We want to create favourite meeting places, which I think the project in principle has very good potential for because it is great architecture. It is very nicely done.”
The planned changes will make it easier to stage events in the centre and to “create a place where people like to be and to stay, whether they want to shop or not.”
Banzhaf says that for a long time Germany was regarded by international investors as a boring market because its cycle is relatively flat. But “flat” has become more desirable now, along with the small fluctuation in the expenditure by the German consumer and the competition for investment property is more intense.
Banzhaf says Corio is looking at further expansion in Germany in the medium term.
“We of course want to be cautious. We want to invest according to our strategy and not do the wrong thing. There are a lot of international parties interested in the German market, so it is not that easy. But if you know the market very well you can find the truffles where the international parties would not, so in the medium term there is potential.”
Banzhaf is guarded about where the “truffles” can be found.
“The good thing is, if you invest in retail you are not dependent on the big office cities. You can do brilliant business in secondary cities. You have to look at the catchment areas, the competition and you have to look at the purchasing power. Of course, we are prepared to look at the big cities if the right opportunity occurred.”
More cautious
Banzhaf said that he would be more cautious about the former East Germany, the Dresden property notwithstanding.
“It is not well integrated. If you look at eastern Germany, most cities are shrinking in size, people are moving away, purchasing power is not the same as in western Germany and unemployment is, on average, higher than in western Germany.
“However, there are cities in eastern Germany which in principle work very well. Leipzig and Dresden have functional retail markets and other cities are catching up.
“Magdeburg is interesting, and not forgetting Berlin which is, in parts, eastern Germany. There are some cities where you could go and there are some other cities where you should be very cautious.”
And where is caution advised? “More or less the other ones which I didn’t mention.”
In the meantime Banzhaf is focused on getting the Dresden centre back on track. He expects the work to reposition the centre will take about 12 months. “I believe that in the course of next year, everything will be looking much better,” he says.
