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1
2CONTTHE SITUATION OUR OFFER01 02
3ENTSBUY-AND-HOLD STRATEGIES03 PARTITIONING APARTMENT BLOCKS INTO
CONDOMINIUMS FOR RESALE04 THE BERLIN RESIDENTIAL REAL ESTATE MARKET05 GERMAN INCOME TAXATION06
A CUSTOM-TAILORED SOLUTION TO INVESTING IN RESIDENTIAL REAL ESTATE IN BERLIN
4
01THE SITUATION
5
RESIDENTIAL REAL ESTATE IS BACKIN FOCUS
6
REAL ASSETS As a result of the financial crisis real assets are back in focus in particular diversified portfolios of residential real estate
REAL ASSETS AS A WAY TO PRESERVE VALUE
• First a flight from capital markets as stock and corporate credit markets tumbled
• Then a flight from cash as fears of bank failures mounted
• Resulting in a flight to the safety of real assets such as gold and real estate
STABLE RETURNS FROM RESIDENTIAL REAL ESTATE
• In times of economic crisis, residential is safer than commercial real estate – provided it is a quality object in the right location bought at the right price
OPTIMISATION THROUGH DIVERSIFICATION
• An intelligently diversified portfolio of carefully chosen residential real estate assets spreads the risk and is thus safer than larger single assets
01THE SITUATION
7
Source: Infinanz Research 08/2002, Prof. Dr. Busse Infinanz GmbH in: Beteiligungsreport 04/2008
PERFORMANCEReal assets have consistently outperformed other asset classes in times of crisis
YEAR CRISIS REAL ASSETS GLOBAL STOCKS US GOVERNMENTBONDS
1987 STOCKMARKET CRASH 5.10% -15.5% +8.6%
1990 GULF WAR I 5.70% -11.3% +0.7%
1997 ASIAN CRISIS 6.02% -11.3% +4.6%
1998 RUSSIA AND LTCM CRISIS 5.97% -2.4% +5.1%
2001 SEPT 11TH 6.20% -14.2% +4.9%
2003 GULF WAR II 6.80% -3.7% +4.2%
8
RISK VS. RETURNRetail and office real estate moves with the economic cycle - residential real estate offers stable returns at comparatively low risk
RISK
RETU
RN
RESIDENTIAL REAL ESTATE
COMMERCIAL REAL ESTATE
SPECIAL SITUATIONS REAL ESTATE
THE SITUATION
GOAL
GOAL
9
DIVERSIFICATIONIntelligently assembling a large portfolio of residential real estate assets diminishes the risk of single acquisitions
NO. OF OBJECTS
RISK
10
Source: Deutsche Bundesbank, Investment Property Databank, Institut der deutschen Wirtschaft Köln
PROTECTIONResidential real estate offers good protection against inflation as demand is inelastic
Institut der deutschen Wirtschaft Köln: “…all in all, direct investments offer better protection from inflation than stocks. In particular residential real estate offers good protection, followed by retail and office. The reason is that demand for living space is independent of inflationary forces.”
YEAR
% R
ETUR
N
160
140
120
100
RETAIL
RESIDENTIAL
OFFICE
INFLATION
1998 2000 2002 2004 2006 2008
11
IN SUMMARY• REAL ASSETS ARE BACK, IN PARTICULAR DIVERSIFIED PORTFOLIOS OF RESIDENTIAL REAL ESTATE
• IN TIMES OF CRISIS, REAL ASSETS HAVE CONSISTENTLY OUTPERFORMED OTHER ASSET CLASSES
• RESIDENTIAL REAL ESTATE OFFERS STABLE RETURNS AT COMPARATIVELY LOW RISK & GOOD PROTECTION AGAINST INFLATION
• INTELLIGENTLY ASSEMBLING A PORTFOLIO OF RESIDENTIAL REAL ESTATE ASSETS DIMINISHES THE RISK OF SINGLE ACQUISITIONS
12
02OUR OFFER
13
AN INDIVIDUAL PORTFOLIO& A CUSTOMIZEDSTRATEGY
14
02OUR OFFER
WHY BERLIN? Berlin is a highly attractive location to invest in real estate
RANKED IN TOP 10 OF EUROPEAN CITIES TO INVEST IN EMERGING TRENDS IN REAL ESTATE 2009 SURVEY
GROWING ATTRACTIVENESS OF THE CITY SINCE GERMAN REUNIFICATION RESULTING IN RISING POPULATION AND WEALTH
• Structural change from manufacturing to diversified modern service economy
• Seat of Government (since 1999) attracting wide array of businesses and institutions
• Large and diversified cultural offering attracting both tourists and new residents
HIGHLY ATTRACTIVE FUNDAMENTALS FOR RESIDENTAL PROPERTY
• High rental yields in international comparison
• Comparatively low but rising rents
• Comparatively low per-square-meter prices
• Very low latent vacancy combined with growing population
BERLIN IS LESS AFFECTED BY THE CRISIS THAN OTHER CITIES
• Good mix of growing service industries with relatively low export orientation
• Did not participate in the bubble so little downside
15
WHY DHI ?DHI provides investors a ‘no-worries’ custom-made vehicle to realise their investment strategy
• DHI IS INVESTING IN RENTED RESIDENTIAL BUILDINGS IN BERLIN
• BERLIN MARKET IS OFFERING ATTRACTIVE RISK-ADJUSTED RETURNS
• EACH INVESTOR’S PORTFOLIO TAILORED TO THEIR SPECIFIC INVESTMENT STRATEGY
• DHI PROVIDES FULL SERVICE COVERING THE WHOLE LIFE CYCLE OF THE PORTFOLIO
» Detailed analysis of the property market in each micro location by Engel&Völkers Commercial Research and other sources
» Prospection of target properties
» Due diligence
» Asset management as well as property management
» Eventual disposal
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STRATEGIESDHI offers tailor-made investment strategies ranging from buy-and-hold to condo conversion
BUY-AND-HOLD
• Buy for current income
• Buy for capital appreciation
• Opportunistic buy
• Buy for modernisation / development
CONDO CONVERSION
• Buy apartment building
• Refurbish if needed
• Split into individual condominiums
• Sell individual units
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IN SUMMARY• BERLIN RANKED IN TOP 10 EUROPEAN CITIES TO INVEST IN REAL ESTATE 2009 SURVEY
• DHI IS INVESTING IN RENTED RESIDENTIAL BUILDINGS IN BERLIN
• DHI PROVIDES INVESTORS A ‘NO-WORRIES’ CUSTOM-MADE VEHICLE TO REALISE THEIR INVESTMENT STRATEGY
• DHI FOCUSES ON BUY-AND-HOLD & CONDO CONVERSION STRATEGIES
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03BUY-AND-HOLD STRATEGIES
19
WE COVERTHE FULL SCOPEOF SERVICES
20
03BUY-AND-HOLD STRATEGIES
PROPERTY PORTFOLIODHI will assemble a diversified Berlin residential property portfolio for each investor which will display some or all of the following characteristics, their degree depending on the chosen overall strategy outlined before
• GENERALLY LOCATED IN GOOD AND UPCOMING NEIGHBOURHOODS
• BUILDINGS IN GOOD STRUCTURAL CONDITION
• MOSTLY TO FULLY RENTED WITH MID-RANGE RENTALS, OFFERING UPSIDE POTENTIAL THROUGH TENANT MANAGEMENT AND RENT INCREASES
• OFFERING ATTRACTIVE INITIAL YIELDS WITH STRONG OPERATING CASH-FLOW HISTORIES
• INCORPORATING RETAIL AND/OR COMMERCIAL SPACE (OF LESS THAN 20% OF INCOME) IN ADDITION TO THE RESIDENTIAL SPACE
21
CUSTOMIZED STRATEGYDHI covers the full scope of services, offering the convenience of a fund combined with the customized strategy of an individual portfolio
PORTFOLIO INDIVIDUALLY
STRUCTURED BASED ON THE
INVESTOR’S DESIRED
RISK/RETURN PROFILE,
TIME HORIZON AND OTHER
INDIVIDUAL CHARACTERISTICS
DHI THEN IDENTIFIES INVESTMENT
OPPORTUNITIES, USING ENGEL&VÖLKERS
COMMERCIAL'S EXTENSIVE NETWORK
AS WELL AS OTHER SOURCES,
EVALUATING BOTH FINANCIAL AS
WELL AS PHYSICAL BUILDING CONDITIONS
AS PART OF THE SELECTION PROCESS
DURING THE INVESTMENT PHASE,
OUR INVESTORS BENEFIT FROM THE
MARKET INSIGHT THAT RESULTS FROM
THE FULL RANGE OF ENGEL&VÖLKERS
COMMERCIAL'S AND BATO
GROUP‘S ACTIVITIES
THE REAL-TIME MARKET KNOWLEDGE
THAT E&V AND BATO GROUP GAIN IN
BUYING, SELLING, FINANCING AND
VALUING PROPERTIES IN THE BERLIN
MARKET IS GATHERED, ANALYZED,
AND APPLIED FOR THE BENEFIT OF
OUR INVESTORS
ONCE THE ACQUISITION OBJECTS
ARE IDENTIFIED, DHI MANAGES
ALL (TECHNICAL, LEGAL ETC.)
ASPECTS OF THE DUE-DILIGENCE
PROCESS IN CONCERT WITH
ESTABLISHED AND WELL-KNOWN
STRATEGIC PARTNERS
DURING THE OWNERSHIP PHASE,
THE SERVICES COMPRISE TENANT
MANAGEMENT AND RENT OPTIMISATION,
REFURBISHMENT AND MODERNISATION
INCLUDING FINANCIAL AND TECHNICAL
PROJECT MANAGEMENT AS WELL AS
CONTROLLING AND INVESTOR REPORTING
DURING THE DISPOSAL PHASE,
DHI IS AGAIN COVERING ALL ASPECTS,
ENSURING VALUE OPTIMISATION
FOR THE INVESTOR ACCORDING TO
THEIR INVESTMENT STRATEGY
OWNERSHIP & DISPOSAL PHASE
CONCEPTION
OWNERSHIP & DISPOSAL PHASE
PROSPECTION ANALYSIS DUE DILIGENCE OWNERSHIP DISPOSAL
ACQUISITION PHASE
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SUMMARYSummary of terms buy-and-hold strategies
STRATEGY CORE CORE PLUS OPPORTUNITY INCOME ORIENTATED
PURCHASE PRICE PER M *1,500-2.000 *900-1,000 *650-850 *500
INITIAL YIELD /FACTOR *5.7% - 4.5% / 17.5 - 22 6.9% - 6.8% / 14.5 - 14.75 x 7.9% - 6.7% / 12.7 - 14.75 x 9.6%/10.4 x
LEVERAGE RATIO 45% / 40% 60% / 55% 70% / 65% 75%
ACQUISITION PHASE 1 YEAR 1 YEAR 1 YEAR 1 YEAR
RENT INCREASE TARGET(COMMERCIAL/RESIDENTIAL) 3.7% / 4.0% 3.7% / 3.8% 3.7% / 3.8% 3.2%
REFURBISHMENT BUDGET *10K / FLAT FOR 20% *10K / FLAT FOR 50% *10K / FLAT FOR 50% -
EXAMPLE AREAS KÜFURSTENDAMM,MITTE PRENZLAUER BERG
KREUZBERG, PRENZLAUER BERG, FRIEDRICHSHAIN,CHARLOTTENBURG
NEUKÖLLN, WEDDING,MOABIT, TIERGARTEN
NEUKÖLLN,WEDDING, MOABIT,
REINICKENDORF,HOHENSCHÖNHAUSEN
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TARGET RETURNTarget return and expected performance for each strategy
CORE CORE PLUS OPPORTUNITY INCOME ORIENTATED
IRR ON EQUITY 9.5%-11% 13.5% 14.19% 21%
CASH-ON-CASH(BEFORE SALES) 2%-3.5% Ca. 4% 3.5-5.75% 8.25%
ROE (BEFORE SALES) 12-22% Ca. 25% 21%-38%% 64%
DISTRIBUTION MINIMUM & TIME FRAME
1.75%-3.0%, DISTRIB. AFTER 2ND YEAR
2.5%, DISTRIB. AFTER 2ND YEAR
2.5%-5.0%, DISTRIB. AFTER 2ND YEAR
8.0%, DISTRIB. AFTER 2ND YEAR
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CORE CORE PLUS OPPORTUNITY INCOME ORIENTATED
ADVERSE DEVELOPMENTOF THE AREA LOW LOW-MEDIUM MEDIUM MEDIUM-HIGH
CAPITAL GAIN MEDIUM MEDIUM HIGH LOW-MEDIUM
TENANT RISK LOW LOW-MEDIUM MEDIUM-HIGH MEDIUM-HIGH
RISK FACTORSRisk factors of the presented buy-and-hold strategies
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IN SUMMARY• DHI WILL ASSEMBLE A DIVERSIFIED & STRUCTURED BERLIN RESIDENTIAL PROPERTY PORTFOLIO TO SUIT INVESTORS’ NEEDS
• GENERALLY LOCATED IN GOOD AND UPCOMING NEIGHBOURHOODS, BUILDINGS ARE IN GOOD STRUCTURAL CONDITION
• DHI COVERS THE FULL SCOPE OF SERVICES WORKING WITH EACH INVESTOR THROUGH THE ACQUISTION TO DISPOSAL PHASE
• TARGET RETURNS ARE HIGH, RISK FACTORS ARE LOW
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04PARTITIONING APARTMENT BLOCKS INTO CONDOMINIUMS FOR RESALE
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WE OFFER A CARE-FREEPACKAGE COVERING ALL ASPECTS
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AUFTEILUNGAnother strategy is buying properties for immediate partitioning into condominiums and selling them to investors or owner-occupiers
• BERLIN HAS A VERY LOW HOME-OWNERSHIP RATE OF ABOUT 13%
• DEMAND FOR CONDOMINIUMS („EIGENTUMSWOHNUNGEN“) IS RISING
» Small investors seeking safety of real assets in manageable volume
» As rents are rising and capital costs are low, buying becomes more attractive for tenants
• PER-SQUARE-METER PRICES OF CONDOS ARE SIGNIFICANTLY ABOVE THOSE OF APARTMENT BUILDINGS EVEN AFTER ASSOCIATED COSTS, OFFERERING ATTRACTIVE PROFIT POTENTIAL
• TIME HORIZON FOR INVESTMENT IS SHORTER THAN THE BUY-AND-HOLD STRATEGY AT ABOUT 2-5 YEARS, DEPENDING ON VOLUME
04PARTITIONING APARTMENT BLOCKSINTO CONDOMINIUMS FOR RESALE
29
DHI PACKAGEDHI is again offering a care-free package, covering all aspects of the process
DETAILED ANALYSIS AND VALUATION OF THE OBJECT
• Location, analysis of vicinity, assessment of marketability
• Condition of the building
• Opportunities to add value (e.g. building extension, roof conversion)
• Analysis of tenant structure
DEVELOPMENT OF THE MARKETING CONCEPT
• Total modernisation and redevelopment, e.g. with branding of the object
• Partial modernisation (e.g. only renovation of flats, not common space)
• Partitioning without extensive renovation
PROVISION OF DEBT FINANCING
• Introduction to banks offering debt financing
• Negociation of terms
• Presentation of detailed project planning
TENANT MANAGEMENT
• Negociation with current tenants to vacate flats
• Provision of temporary accomodation during renovation work for tenants turned owners
• Provision of alternative accomodation for tenants willing to move out
• Management of rent increases
30
DHI PACKAGEDHI is again offering a care-free package, covering all aspects of the process
OPTIMISATION OF FLOORPLAN DESIGN (PARTITIONING, OPTIMISATION, MERGING FLATS)
FLAT-BY-FLAT ANALYSIS OF ANTICIPATED RE-SALE PRICES BASED ON FLAT CHARACTERISTICS (FLOOR, LOCATION, LIGHTING, CONDITION,
FURNISHINGS ETC.)
OBTAINING CERTIFICATE OF SELF-CONTAINED CONDITION („ABGESCHLOSSENHEITSBESCHEINIGUNG“)
PREPARATION OF DECLARATION OF PARTITION („TEILUNGSERKLÄRUNG“), DRAFT OF SALES CONTRACT AND CONSTRUCTION SPEC LIST
PREPARATION OF (FUTURE) FLAT OWNERS ASSOCIATION RULES (CREATION OF RESERVE FUND ETC.)
CALCULATION / PLANNING OF NECESSARY CONSTRUCTION WORK AND REQUEST FOR QUOTATIONS
AWARD OF CONTRACT
SUPERVISION OF CONSTRUCTION/RENOVATION WORK
MANAGEMENT OF SALE PROCESS
31
SUMMARYSummary of terms condo conversion strategy
PURCHASE PRICE PER M2 *1,100
INITAL YIELD / FACTOR 6.5% / 15.4x
LEVERAGE RATIO 65 / 35
ACQUISITION PHASE 1 YEAR
SALES PERIOD 3-5 YEARS
REFURBISHMENT COST *10K / UNIT FOR 70% (RESIDENTIAL) & 50% (COMMERCIAL)
COST FOR BUYING OUT TENANTS *6,000 / UNIT FOR 70%
CONDO SALES PRICE PER M2 *2,200
32
RISK FACTORS Risk factors condo conversion strategy
• THE MAIN RISK IS PURCHASING PROPERTIES THAT HAVE CHARACTERISTICS HINDERING A SALE OF THE CONDOS AT THE PROJECTED PRICES
» Wrong orientation of the property (lack of light)
» Wrong micro-location, e.g. too noisy
» Lack of elevator
» Lack of outside space / balcony
• WE INTEND TO COUNTER THIS RISK BY CAREFULLY SELECTING PROPERTIES THAT FULFIL THE NECESSARY CRITERIA
• IN ADDITION, PROBLEMATIC UNITS CAN BE SOLD TO INVESTORS (AS OPPOSED TO OWNER-OCCUPIERS) AS RENTING TENDS TO BE LESS PROBLEMATIC
33
TARGET RETURNTarget return and expected performance for condo conversion strategy
CASH-ON-CASH 40%
ROE (BEFORE SALES) 80%
DISTRIBUTION MINIMUM & TIME FRAME 10% DISTRIB. 3RD YEAR
34
THE TEAMThe DHI Team, Expertise and Track Record
ANDREA BARBATO
• Founder and MD of BATO Group Real Estate Investments (total investment volume in Berlin 45mio euros, acquiring, financing,
managing of the assets)
• Previous assignments with Enstar Capital and Garbe Real Estate in London
RACKHAM F. SCHRÖDER
• Managing Director of Engel & Völkers Commercial Berlin (largest broker of residential buildings in Berlin), has accompanied about
2.5bn euros in residential and commercial real estate deals
MATTHIAS DUX
• 10 years banking experience with Deutsche Bank in London and Tokyo
• Previous assignments in Private Equity with Paribas bank in Paris and management consulting with Booz Allen & Hamilton in Chicago
• Insead MBA
35
IN SUMMARY• CHOICE OF STRATEGY FROM MENU OF BUY-AND-HOLD OR CONDOMINIUM STRATEGIES
• FULL-SERVICE PACKAGE DURING ALL PHASES OF THE PORTFOLIO LIFE CYCLE
• COMBINATION OF BENEFITS OF CUSTOMISED STRATEGY WITH SCALE AND EXPERIENCE OF LARGER ORGANISATION
• EXPERIENCED TEAM WITH PROVEN TRACK RECORD
36
05THE BERLIN RESIDENTIAL
REAL ESTATE MARKET
37
BERLIN IS GROWINGDESPITE THE OVERALLECONOMIC SITUATION
38
05THE BERLIN RESIDENTIAL
REAL ESTATE MARKET
BERLIN AT A GLANCE• CAPITAL OF GERMANY AND SINCE 1999 SEAT OF GOVERNMENT
• 3.4 MILLION INHABITANTS
• 128,000 RESIDENTIAL AND COMMERCIAL BUILDINGS
» Vacancy rate 2006: 5.1%
» Vacancy rate 2007: 4.6 %
• 1,882,000 RESIDENTIAL UNITS
• 18 MILLION SQUARE METRES OFFICE SPACE
• 4.3 MILLION SQUARE METRES RETAIL SPACE
39
ATTRACTIONSFurthermore, Berlin provides a wide scientific and cultural offer
• 7 UNIVERSITIES
• 20 PUBLIC AND PRIVATE COLLEGES
• 80 RESEARCH INSTITUTIONS (E.G., MAX-PLANCK AND FRAUNHOFER INSTITUTES)
• LEADING EUROPEAN TRADE FAIR AND CONVENTION LOCATION
• 3 OPERA HOUSES
• 326 THEATRES AND CINEMAS
• 175 MUSEUMS AND 400 ART GALLERIES
• MORE THAN 3,400 RESTAURANTS
• MORE THAN 120 CLUBS
• HERTHA BSC FOOTBALL, ALBA BERLIN BASKETBALL, EISBÄREN ICE HOCKEY, BERLIN MARATHON
40
Source: Office for Statistics Berlin Brandenburg, March 2009
RADICAL CHANGEBerlin has experienced a radical structural change from a production location to a well-diversified service location since German reunification
1991 2008
6%
21%
6%
17%
28%
10%
5%
7%7%
15%
3%
16%
34%
9%
7%
9%
TOTAL 57,428 MILLION EUROS TOTAL 75,523 MILLION EUROS
MANUFACTURING SECTOR
CONSTRUCTION INDUSTRY
TRADE, HOSPITALITY AND TRANSPORT
FINANCE, LETTING AND CORPORATE SERVICE PROVIDERS
PUBLIC ADMINISTRATION
EDUCATIONAL SECTOR
HEALTH CARE
PUBLIC AND PRIVATE SERVICE PROVIDERS
41
HEALTHCARE
TOURISM
MEDIA, INFORMATION AND COMMUNICATION
TRAFFIC ENGINEERING AND MOBILITY
CULTURE
ENVIRONMENTAL TECHNOLOGY
30%
22%11%
22%
13%2%
Source: Engel & Völkers Research & Consulting 2008
NEW JOBSNew jobs are created in various innovative and growing sectors in Berlin
42
CITY
EURO
S26,000
24,000
22,000
20,000
18,000
16,000
MUNICH DUSSELDORF STUTTGART FRANKFURT MAIN COLOGNE HAMBURG HANOVER BERLIN
Berlin has enormous potential for growth
Source: Engel & Völkers Research according to MB Research 2009
GROWTH POTENTIALPurchasing power per capita in euros (2009) - Berlin has enormous potential for growth
43
PEAK RENTSPeak rents for office space in international comparison
CITY
EURO
S1400
1200
1000
800
600
400
200
0
LONDON PARIS MADRID BERLIN FRANKFURT HAMBURG DUSSELDORF MUNICH
Q3 2007
Q3 2008
44
OFFICE MARKETSOffice markets in national comparison
CITY
1,00
0 M
2
18,000
16,000
14,000
12,000
10,000
8000
6000
4000
2000
0
HOUSING STOCK LET IN 1,000 M2
VACANCY RATE IN 1,000 M2
BERLIN DUSSELDORF FRANKFURT HAMBURG COLOGNE MUNICH (CITY) STUTTGART
45
BERLIN VACANCYBerlin has practically no latent vacancy
CITY
1,00
0 M
2100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
BERLIN DUSSELDORF FRANKFURT HAMBURG KOH MUNICH STUTTGART
ACTIVE SUPPLY SURPLUS
STRUCTURAL VACANCY
LATENT VACANCY
FLUCTUATION RESERVE
ACTIVE SUPPLY SURPLUS
STRUCTURAL VACANCY
LATENT VACANCY
FLUCTUATION RESERVE
46
GROWTH POTENTIALBerlin rents are increasing – but there is still potential for further increases compared to other German cities
YEAR
EURO
S12
10
8
6
4
2
0
MUNICHSTUTTGARTFRANKFURTDUSSELDORFHAMBURGKOLNBERLIN-WESTBELIN-EAST
1990 1994 1998 2002 2006 2010
47
PROPERTY YIELDSGerman property yields are among the highest in Europe
Source: Engel & Völkers Research according to Feri Research 2009
YEAR
YIEL
D %
9
8
7
6
5
4
3
GERMANYFRANCEITALYENGLANDSPAIN
1992 1994 1996 1998 2000 2002 2004 2006 2008
48
HOMEOWNERSHIPLow homeownership rate in Berlin offers high potential for partitioning apartment block buildings into individual flats
Source: Engel & Völkers Research according to Feri Research 2009
HOM
EOW
NERS
HIP
RATE
%
100
90
80
70
60
50
40
30
20
10
0
SPAI
N
NORW
AY
IREL
AND
PORT
UGAL
POLA
ND
ITAL
Y
GREA
T BR
ITAI
N
BELG
IUM
SWED
EN
FINL
AND
FRAN
CE
AUST
RIA
THE
NETH
ERLA
NDS
DENM
ARK
CZEC
H RE
PUBL
IC
GERM
ANY
SWIS
S
HOMEOWNERSHIP RATE OF 13% IN BERLIN
49
PRICESFavourable purchase price level for apartment block buildings
Source: Engel & Völkers Research according to empirica rental and purchase price ranking in the 3rd quarter of 2008
CITY
EURO
S PE
R M
23,000
2,500
2,000
1,500
1,000
500
0BERLIN DUSSELDORF FRANKFURT AM MAIN HAMBURG COLOGNE MUNICH STUTTGART
50
MIGRATIONPromising economic sectors and an attractive cultural offer have led to a positive balance of migration in Berlin in recent years
Source: E&V Research according to GENESIS Online, Office for Statistics Berlin Brandenburg, 2009
YEAR
MIG
RATI
ON14,000
12,000
10,000
8,000
6,000
4,000
2,000
0
2003 2004 2005 2006 2007
51
HOUSEHOLDSBerlin – increasing number of households predicted due to singularization and new residents moving to Berlin
Source: E&V Research according to GENESIS Online, Office for Statistics Berlin Brandenburg, 2009
YEAR
HOUS
EHOL
DS (1
,000
’S) 2,100
2,050
2,000
1,950
1,900
1,850
1,800
2006 2010 2015
52
DEMANDDemand for living space per capita is increasing
YEAR
HOUS
EHOL
DS50
45
40
35
30
25
20
GERMANY WESTGERMANY EASTGERMANY
2000 2010 2020 2030 2040 2050
53
POOR OFFERINGThe increasing demand for living space meets a stagnating offer
Source: E&V Research according to State Office for Statistics Berlin Brandenburg 2009
YEAR
COM
PLET
ED A
PART
MEN
TS 35,000
30,000
25,000
20,000
15,000
10,000
5,000
0
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
54
55
Reasons for Berlin:
• GERMANY’S INFRASTRUCTURE IS EXCELLENT
• BERLIN IS SITUATED IN A UNIQUE GEOSTRATEGIC LOCATION IN THE EU
• BERLIN IS GROWING BECAUSE IT IS ATTRACTIVE
• INDUSTRIES OF THE FUTURE ARE GROWING DESPITE DIFFICULT OVERALL ECONOMIC SITUATION
• NUMBER OF HOUSEHOLDS AND DEMAND FOR LIVING SPACE WILL EXCEED THE OFFER IN THE MEDIUM TERM
• RENTS AND PURCHASE PRICES ARE STILL LOW; THEY WILL, HOWEVER, INCREASE
• HOMEOWNERSHIP RATE OF MERELY 13%
56
06GERMAN INCOME TAXATION
57
WE OFFER TAILOR-MADEINVESTMENTSTRATEGIES
58
TAX FACTSSpecial Real Estate Based Tax Non-recurring Tax
REAL ESTATE TRANSFER TAX
• Triggered primarily by conclusion of a sales contract
• Tax Basis: purchase price
• Tax Rate: 3.5 % (except Berlin: 4.5 %)
Special Real Estate Based Tax Current Tax
LAND TAX
• Levied on any German real estate held for private or business purposes
• Tax Basis: special value assessed (only) for tax purposes
• Tax Rate: municipal rate fixed by the municipality amount depends on type and age of the
building (as part of the service charge regularly borne by the tenants)
06GERMAN INCOME TAXATION
59
GERMAN INCOME TAXCalculation of Income
• FINANCIAL ACCOUNTING OR CASH BASED ACCOUNTING DEPENDING ON LEGAL STRUCTURE AND STRATEGY
• TAX DEPRECIATION
• 2.0 – 3.0 % p.a. on buildings
• no depreciation on land
• DEDUCTIBLE EXPENSES
• Finance Costs
» fully deductible in case of private investment
» in case of business investment (with trading income) fully deductible if not exceeding 1 mill. EUR p.a.
• Costs for Maintenance and Repair
» in general fully deductible if no extension or material improvement
» except for costs following closely upon the acquisition (3 years period) if the expenditure exceeds 15 % of the acquisition costs of the building
60
BUY-AND-HOLDDirect Investment (no German SPV)
INCOME TAXLEGAL FORM INDIVIDUAL PERSON LIMITED COMPANY
INCOME TAX (EINKOMMEN / KÖRPERSCHAFTSTEUE) INCOME TAX CORPORATE INCOME TAX
TAX LIABILITY / TAX BASIS 1) LIMITED TO GERMAN-SOURCED INCOME LIMITED TO GERMAN-SOURCED INCOME
TAX RATE FOR CURRENT INCOME 26.25% - 44.31%47.48% FOR INCOME EXCEEDING TEUR 250 15.83%
TAX RATE FOR GAIN REALISED BY SALE STANDARD TAX RATE (SEE ABOVE)TAX EXEMPTION IF HOLDING PERIOD > 10YRS
ASSET DEAL:STANDARD TAX RATE (SEE ABOVE)
NO TAX EXEMPTION AVAILABLE
SHARE DEAL: 2)
NOT SUBJECT TO GERMAN INCOME TAX
TRADE TAXLEGAL FORM INDIVIDUAL PERSON LIMITED COMPANY
TRADE TAX (GEWERBESTEUER) NOT APPLICABLE 3) ONLY IN CASE OF PERMANENT
ESTABLISHMENT IN GERMANY
TAX BASIS NOT APPLICABLETRADING INCOME
(INCOME PLUS SEVERAL SPECIFIC ADDITIONS & REDUCTIONS)
TAX RATE NOT APPLICABLE
MUNICIPAL RATE FIXED BY THE MUNICIPALITY (E.G. IN BERLIN: EFFECTIVE TAX RATE APPROX.
14.35%) ENHANCED REDUCTION OF RENTAL INCOME AVAILABLE ON REQUEST SO THAT EFFECTIVE TRADE
TAX MAY BE REDUCED TO ZERO
1) Tax rate includes 5.5% solidarity surcharge.2) Information for a shareholder having no German residence.3) Provided that no commercial trade exists. A commercial trade is generally assumed if more than 3 objects are sold within a 5 year period (so-called “3-object-limit).
Special Note:Taxation in the state of residence subject to the terms of the relevant double tax treaty.
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Indirect Investment (with German SPV)
INCOME TAXLEGAL FORM GMBH LIMITED COMPANY GMBH & CO. KG LIMITED PARTNERSHIP 1)
INCOME TAX (EINKOMMEN / KÖRPERSCHAFTSTEUE)
CORPORATE INCOME TAX TRANSPARENT FOR GERMANINCOME TAX PURPOSES
TAX LIABILITY / TAX BASIS PRINCIPALLY TOTAL INCOME 2) PRINCIPALLY TOTAL INCOME 2)
TAX RATE FOR CURRENT INCOME 3) 15.83%
INCOME PROPORTIONATELY ATTRIBUTED TO THE PARTNERS ACCORDING TO THEIR RESPECTIVE
INTEREST
TAX RATE FOR PARTNERS:-INDIVIDUAL PARTNERS: 26.25% - 44.31%
(47.48% FOR INCOME > TEUR 250)-LIMITED COMPANY PARTNERS: 15.83%
TAX RATE FOR GAIN REALISED BY SALE
ASSET DEAL:STANDARD TAX RATE (SEE ABOVE)
NO TAX EXEMPTION AVAILABLE
SHARE DEAL: 5)
GENERALLY NOT SUBJECT TO GERMAN INCOME TAX, BUT DEPENDING ON DOUBLE TAX TREATY
STANDARD TAX RATE (SEE ABOVE) 4)
TAX EXEMPTION:-FOR INDIVIDUALS IF HOLDING PERIOD >10 YRS
- NOT AVAILABLE FOR LIMITED COMPANIES
TRADE TAXLEGAL FORM GMBH LIMITED COMPANY GMBH & CO. KG LIMITED PARTNERSHIP 1)
TRADE TAX (GEWERBESTEUER)
ALWAYS SUBJECT TO TRADE TAX NOT APPLICABLE (6) (7)
TAX BASIS TRADING INCOME (INCOME PLUS SEVERAL SPECIFIC ADDITIONS & REDUCTIONS) NOT APPLICABLE
TAX RATE
MUNICIPAL RATE FIXED BY THE MUNICIPALITY (E.G. IN BERLIN: EFFECTIVE TAX RATE APPROX. 14.35%) ENHANCED REDUCTION OF RENTAL INCOME AVAILABLE ON REQUEST SO THAT EFFECTIVE TRADE TAX MAY BE
REDUCED TO ZERO
NOT APPLICABLE
1) Since, generally, the GmbH as general partner of the partnership does not have any business activity, it will not be contemplated in the following.2) Except foreign-sourced income if applicable, the taxation of which depends on the respective double tax treaty.3) Tax rate includes 5.5% solidarity surcharge.4) Since the partnership is transparent for German income purposes, the gain realised by the sale of the interests in the partnership is taxed like the gain resulting from an asset deal.5) Information for a shareholder having no German residence.6) Provided that no commercial trade exists. A commercial trade is generally assumed if more than 3 objects are sold within a 5 year period (so-called “3-object-limit).7) Provided that partnership is structured as pure holding company.
Special Note:Taxation in the state of residence subject to the terms of the relevant double tax treaty.
BUY-AND-HOLDDirect Investment (no German SPV)
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CONDO CONVERSION Direct Investment (no German SPV)
INCOME TAXLEGAL FORM LIMITED COMPANY
INCOME TAX (EINKOMMEN / KORPERSCHAFTSTEUE) CORPORATE INCOME TAX
TAX LIABILITY / TAX BASIS 1) LIMITED TO GERMAN-SOURCED INCOME
TAX RATE FOR CURRENT INCOME 15.83%
TAX RATE FOR GAIN REALISED BY SALE
ASSET DEAL:STANDARD TAX RATE (SEE ABOVE)
NO TAX EXEMPTION AVAILABLE
SHARE DEAL: 2)
NOT SUBJECT TO GERMAN INCOME TAX
TRADE TAXLEGAL FORM LIMITED COMPANY
TRADE TAX (GEWERBESTEUER)
ONLY IN CASE OF PERMANENTESTABLISHMENT IN GERMANY
TAX BASISTRADING INCOME
(INCOME PLUS SEVERAL SPECIFIC ADDITIONS & REDUCTIONS)
TAX RATEMUNICIPAL RATE FIXED BY THE MUNICIPALITY
(E.G. IN BERLIN: EFFECTIVE TAX RATE APPROX. 14.35%) NO TAX EXEMPTION AVAILABLE
1) Tax rate includes 5.5% solidarity surcharge.2) Information for a shareholder having no German residence.
Special Note:Taxation in the state of residence subject to the terms of the relevant double tax treaty.
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Indirect Investment (with German SPV)
INCOME TAXLEGAL FORM GMBH LIMITED COMPANY GMBH & CO. KG LIMITED PARTNERSHIP 1)
INCOME TAX (EINKOMMEN / KÖRPERSCHAFTSTEUE)
CORPORATE INCOME TAX TRANSPARENT FOR GERMANINCOME TAX PURPOSES
TAX LIABILITY / TAX BASIS PRINCIPALLY TOTAL INCOME 2) PRINCIPALLY TOTAL INCOME 2)
TAX RATE FOR CURRENT INCOME 3) 15.83%
INCOME PROPORTIONATELY ATTRIBUTED TO THE PARTNERS ACCORDING TO THEIR RESPECTIVE INTEREST
TAX RATE FOR PARTNERS:-INDIVIDUAL PARTNERS: 26.25% - 44.31%
(47.48% FOR INCOME > TEUR 250)-LIMITED COMPANY PARTNERS: 15.83%
TAX RATE FOR GAIN REALISED BY SALE
ASSET DEAL:STANDARD TAX RATE (SEE ABOVE)
NO TAX EXEMPTION AVAILABLE
SHARE DEAL: 5)
GENERALLY NOT SUBJECT TO GERMAN INCOME TAX, BUT DEPENDING ON DOUBLE TAX TREATY
STANDARD TAX RATE (SEE ABOVE) 4)
NO TAX EXEMPTION AVAILABLE
TRADE TAXLEGAL FORM GMBH LIMITED COMPANY GMBH & CO. KG LIMITED PARTNERSHIP 1)
TRADE TAX (GEWERBESTEUER)
ALWAYS SUBJECT TO TRADE TAX
TAX BASIS TRADING INCOME (INCOME PLUS SEVERAL SPECIFIC ADDITIONS & REDUCTIONS)
TAX RATEMUNICIPAL RATE FIXED BY THE MUNICIPALITY
(E.G. IN BERLIN: EFFECTIVE TAX RATE APPROX. 14.35%) NO TAX EXEMPTION AVAILABLE
MUNICIPAL RATE FIXED BY THE MUNICIPALITY (E.G. IN BERLIN: EFFECTIVE TAX RATE APPROX. 14.35%)
TAX EXEMPT AMOUNT: EUR 24,500
1) Since, generally, the GmbH as general partner of the partnership does not have any business activity, it will not be contemplated in the following.2) Except foreign-sourced income if applicable, the taxation of which depends on the respective double tax treaty.3) Tax rate includes 5.5% solidarity surcharge.4) Since the partnership is transparent for German income purposes, the gain realised by the sale of the interests in the partnership is taxed like the gain resulting from an asset deal.5) Information for a shareholder having no German residence.
Special Note:Taxation in the state of residence subject to the terms of the relevant double tax treaty.
CONDO CONVERSION Direct Investment (no German SPV)
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DISCLAIMER Any description at this point may only be a rough outline about possible tax consequences, illustrated in consideration of main possible investment structures. The information contained herein is not exhaustive and can only be of general nature, not being intended to address the circumstances of any particular individual or entity. German tax law is furthermore subject to constant changes so that there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should therefore act on such information without appropriate professional advice after a thorough examination of the particular situation.
It is therefore strictly recommended to enlist personal tax adviser‘s assistance in the run-up to any potential property investment!
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DHI Deutsche Hauptstadt Immobilien Real Estate Investments GmbHVoßstr. 22 10117 Berlin Germany
www.dhiinvestments.comT: +49 (0) 30 33 93 59 40F: +49 (0) 30 33 93 59 51E: [email protected]