Corporate overview

Warburg-HIH Invest is one of the leading investment managers for real estate in Germany and Europe. We adopt a future-oriented approach to finding, developing and managing properties in the interests of our clients. Decades of experience, proximity to the real estate markets and a tight-knit network allow us to identify real estate opportunities and quickly implement them in the right phase of the market. Around 150 institutional clients have entrusted their investments to Warburg- HIH Invest. Our specialists for structuring, product development, real estate management and market development all work to develop the right investment solutions for them.

Investment principles & strategy

We offer a broad spectrum of investment solutions. These range from risk-diversified real estate fund solutions pursuant to the German Investment Act – with a defined investment strategy, a varying country and sector focus and different risk profiles – to individual solutions for club deals or separate accounts depending on the respective risk/ return profile of our investors. This gives institutional investors a chance to benefit from our profound real estate expertise and high degree of vertical integration, either by investing in intensely managed real estate products, with Warburg-HIH Invest effectively covering the life cycle of a given property end to end, or by taking advantage of selected components within the framework of individual mandates. Regardless of the solution chosen, Warburg-HIH Invest sets itself apart with its consistent customer orientation, extensive property know-how, in-depth market knowledge and broad-based network.

Strategic corporate development

Warburg-HIH Invest designs and implements structured real estate investment solutions in accordance with the German Capital Investment Act (KAGB) so as to give institutional investors the opportunity to invest in European real estate markets. The products are tailored to bespoke investor needs and complemented by a flexibly combinable service spectrum. We maintain local offices in many cities in Germany and Europe, and are continuously expanding our network. We see the combination of our extensive property know how and network, and our integrated services with local expertise and in-depth market knowledge, as the key to our continued success.

Sector forecasts

OFFICE: European office markets in the CBDs of global cities and economic centres saw almost full occupancy and very limited speculative development before COVID-19.These fundamentals are stabilising forces given the impact from the lockdown and the recession in 2020. In anticipation of an economic recovery in 2021, the German market for office real estate offers many opportunities, driven by solid fundamentals and stable employment. Nevertheless, remote working and the ongoing discussion about working from home, future demand for office space and other issues will change the demand for office real estate. Modern office space with strong ESG alignment located in CBDs will be the most resilient assets. Core office properties with stable cash flows and strong covenants from tenants will also be seen as an alternative to bond investments in the medium to long term. Due to Brexit and several global risk factors, the capital inflow to German office markets will probably increase after a strong decline in 2020. In light of the strong investment demand, yields in the core segment are stable (office yields for core office buildings are at around 3.0% and are even lower for some trophy buildings) but could increase for higher risk profiles like value add and opportunistic. Overall, the quality of asset management plays an even larger role.

RETAIL:  The impact of COVID-19 on retail varies according to the respective retail subsector. Shopping centres and high-street retail have been hit by the lockdown and changing shopping habits. Further market adjustments and a changing retail landscape are expected. With an economic recovery and the comparatively stable fundamentals in Germany, the situation for retail in Germany is probably more robust than in other European countries. In addition to the ‘Big Seven’ cities, there are a number of growing urban centres with positive demographic perspectives boasting high retail centrality and other features conducive to the sector, such as tourism, universities and a high recreational value, thereby creating stable retail markets in the long term. Nevertheless, the quarters ahead will be challenging for retail – even in cities with positive long-term fundamentals. With the market share accounted for by online retail on the rise, omni-channel concepts have progressively gained importance.

Alongside showrooms and a growing share of food and beverage concepts, they represent an increasingly important tenant base. At the same time, fashion retailers continue to be of great importance for high-street loca- tions. However, their concepts are subject to massive changes and should be scrutinised and examined in detail. In addition to high-street locations, local convenience centres and neighbourhood centres anchored by a supermarket are an attractive addition to any portfolio. These concepts could even benefit from the lockdown and are much less exposed to competition from online retailers than shopping centres and high-street shops. Given the resilient fundamentals, investor demand for such concepts has increased, and demand in growing regions will continue to exceed the available supply over the next 12 months, which means that yields are expected to remain low for retail parks and neighbourhood centres.

INDUSTRIAL: The main drivers for the above-average growth of the logistics industry will maintain their momentum in 2021. Furthermore, COVID-19 catalyses the long-term megatrends supporting the growth and economic importance of logistics. The megatrends include the strong momentum of online retailing, e-commerce and digitalisation, among others. Additional drivers for logistics are a re-thinking of supply chain resilience, an increase in stock holding for critical products (at least) and potential re- and near shoring activities in the industry. While it is reasonable to assume for the investment side that initial yields may remain at the current level or decrease even further, the support from rental increases in the leading cities in Europe is limited. What contributes to the situation, in addition to the brisk demand for logistics facilities, is the limited supply in many cities and the competition with other types of use for land located close to cities. It is further exacerbated by the highly restrictive zoning of logistics facilities in some countries, which makes a swift supply expansion virtually impossible. Combined with the persistently high yield differences between logistics assets, on the one hand, and office and retail assets, on the other hand, these parameters will probably ensure that logistics space will continue to be in strong demand in 2021 and that it will fur- ther expand its contribution to the diversification of portfolios.

Performance verification

The fund performance is calculated using the standard BVI-Method for regulated German Special-AIF (time-weighted performance calculation). The BVI-Method employs investment fund prices and therefore takes account of all fixed costs inherent to the fund. The BVI-Performance results of our funds is delivered to MSCI for sector wide benchmark analysis (SFIX). As well we agree performance targets with our clients based on IRR and income returns (time and money weighted performance calculations) on fund and asset level. 

COMPLIANCE STATEMENT

This document may not be reproduced or circulated without the express consent of Warburg-HIH Invest. In case of violation, we assume no liability whatsoever for possible damages incurred. The contents were carefully prepared by Warburg-HIH Invest in full confidence that the data provided to us by third parties is correct; however, we cannot assume any guarantee for the accuracy, completeness or currency of this information.