Dhi Brochure

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DHI - Deutsche Hauptstadt Immobilien GmbH is a Berlin-based Asset & Portfolio Manager specialized in residential real estate investments in Berlin.
Recently established as a new investment platform by 3 individuals with deep knowledge and long experience in the international real estate and finance fields DHI and its international multi-lingual team is ready to assist their investors right from the very beginning.

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Dhi Brochure

  1. 1. 1
  2. 2. CONT 01 THE SITUATION 02 OUR OFFER 2
  3. 3. A CUSTOM-TAILORED SOLUTION TO INVESTING IN RESIDENTIAL REAL ESTATE IN BERLIN ENTS 03 BUY-AND-HOLD STRATEGIES 04 PARTITIONING APARTMENT BLOCKS INTO CONDOMINIUMS FOR RESALE 05 THE BERLIN RESIDENTIAL REAL ESTATE MARKET 06 GERMAN INCOME TAXATION 3
  4. 4. 01 THE SITUATION 4
  5. 5. RESIDENTIAL REAL ESTATE IS BACK IN FOCUS 5
  6. 6. 01 THE SITUATION 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 6
  7. 7. PERFORMANCE Real assets have consistently outperformed other asset classes in times of crisis YEAR CRISIS REAL ASSETS GLOBAL STOCKS US GOVERNMENT BONDS 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% Source: Infinanz Research 08/2002, Prof. Dr. Busse Infinanz GmbH in: Beteiligungsreport 04/2008 7
  8. 8. RISK VS. RETURN Retail and office real estate moves with the economic cycle - residential real estate offers stable returns at comparatively low risk GOAL SPECIAL SITUATIONS REAL ESTATE RETURN COMMERCIAL REAL ESTATE RESIDENTIAL REAL ESTATE GOAL THE SITUATION RISK 8
  9. 9. DIVERSIFICATION Intelligently assembling a large portfolio of residential real estate assets diminishes the risk of single acquisitions RISK NO. OF OBJECTS 9
  10. 10. PROTECTION Residential 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.” 160 % RETURN RETAIL 140 RESIDENTIAL OFFICE 120 INFLATION 100 1998 2000 2002 2004 2006 2008 YEAR Source: Deutsche Bundesbank, Investment Property Databank, Institut der deutschen Wirtschaft Köln 10
  11. 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 11
  12. 12. 02 OUR OFFER 12
  13. 13. AN INDIVIDUAL PORTFOLIO & A CUSTOMIZED STRATEGY 13
  14. 14. 02 OUR 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 14
  15. 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 15
  16. 16. STRATEGIES DHI 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 16
  17. 17. 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 17
  18. 18. 03 BUY-AND-HOLD STRATEGIES 18
  19. 19. WE COVER THE FULL SCOPE OF SERVICES 19
  20. 20. 03 BUY-AND-HOLD STRATEGIES PROPERTY PORTFOLIO DHI 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 20
  21. 21. CUSTOMIZED STRATEGY DHI covers the full scope of services, offering the convenience of a fund combined with the customized strategy of an individual portfolio ACQUISITION PHASE OWNERSHIP & DISPOSAL PHASE CONCEPTION PROSPECTION ANALYSIS DUE DILIGENCE OWNERSHIP DISPOSAL PORTFOLIO INDIVIDUALLY DHI THEN IDENTIFIES INVESTMENT THE REAL-TIME MARKET KNOWLEDGE ONCE THE ACQUISITION OBJECTS DURING THE OWNERSHIP PHASE, DURING THE DISPOSAL PHASE, STRUCTURED BASED ON THE OPPORTUNITIES, USING ENGEL&VÖLKERS THAT E&V AND BATO GROUP GAIN IN ARE IDENTIFIED, DHI MANAGES THE SERVICES COMPRISE TENANT DHI IS AGAIN COVERING ALL ASPECTS, INVESTOR’S DESIRED COMMERCIAL'S EXTENSIVE NETWORK BUYING, SELLING, FINANCING AND ALL (TECHNICAL, LEGAL ETC.) MANAGEMENT AND RENT OPTIMISATION, ENSURING VALUE OPTIMISATION RISK/RETURN PROFILE, AS WELL AS OTHER SOURCES, VALUING PROPERTIES IN THE BERLIN ASPECTS OF THE DUE-DILIGENCE REFURBISHMENT AND MODERNISATION FOR THE INVESTOR ACCORDING TO TIME HORIZON AND OTHER EVALUATING BOTH FINANCIAL AS MARKET IS GATHERED, ANALYZED, PROCESS IN CONCERT WITH INCLUDING FINANCIAL AND TECHNICAL THEIR INVESTMENT STRATEGY INDIVIDUAL CHARACTERISTICS WELL AS PHYSICAL BUILDING CONDITIONS AND APPLIED FOR THE BENEFIT OF ESTABLISHED AND WELL-KNOWN PROJECT MANAGEMENT AS WELL AS AS PART OF THE SELECTION PROCESS OUR INVESTORS STRATEGIC PARTNERS CONTROLLING AND INVESTOR REPORTING 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 21
  22. 22. SUMMARY Summary 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 7.9% - 6.7% / 12.7 - INITIAL YIELD /FACTOR *5.7% - 4.5% / 17.5 - 22 6.9% - 6.8% / 14.5 - 14.75 x 9.6%/10.4 x 14.75 x LEVERAGE RATIO 45% / 40% 60% / 55% 70% / 65% 75% ACQUISITION PHASE 1 YEAR 1 YEAR 1 YEAR 1 YEAR RENT INCREASE TARGET 3.7% / 4.0% 3.7% / 3.8% 3.7% / 3.8% 3.2% (COMMERCIAL/RESIDENTIAL) REFURBISHMENT BUDGET *10K / FLAT FOR 20% *10K / FLAT FOR 50% *10K / FLAT FOR 50% - KREUZBERG, NEUKÖLLN, KÜFURSTENDAMM, PRENZLAUER BERG, NEUKÖLLN, WEDDING, WEDDING, MOABIT, EXAMPLE AREAS MITTE PRENZLAUER BERG FRIEDRICHSHAIN, MOABIT, TIERGARTEN REINICKENDORF, CHARLOTTENBURG HOHENSCHÖNHAUSEN 22
  23. 23. TARGET RETURN Target 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 2%-3.5% Ca. 4% 3.5-5.75% 8.25% (BEFORE SALES) ROE (BEFORE SALES) 12-22% Ca. 25% 21%-38%% 64% DISTRIBUTION MINIMUM & 1.75%-3.0%, 2.5%, 2.5%-5.0%, 8.0%, TIME FRAME DISTRIB. AFTER 2ND YEAR DISTRIB. AFTER 2ND YEAR DISTRIB. AFTER 2ND YEAR DISTRIB. AFTER 2ND YEAR 23
  24. 24. RISK FACTORS Risk factors of the presented buy-and-hold strategies CORE CORE PLUS OPPORTUNITY INCOME ORIENTATED ADVERSE DEVELOPMENT OF THE AREA LOW LOW-MEDIUM MEDIUM MEDIUM-HIGH CAPITAL GAIN MEDIUM MEDIUM HIGH LOW-MEDIUM TENANT RISK LOW LOW-MEDIUM MEDIUM-HIGH MEDIUM-HIGH 24
  25. 25. 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 25
  26. 26. 04 PARTITIONING APARTMENT BLOCKS INTO CONDOMINIUMS FOR RESALE 26
  27. 27. WE OFFER A CARE-FREE PACKAGE COVERING ALL ASPECTS 27
  28. 28. 04 PARTITIONING APARTMENT BLOCKS INTO CONDOMINIUMS FOR RESALE AUFTEILUNG Another 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 28
  29. 29. DHI PACKAGE DHI 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 29
  30. 30. DHI PACKAGE DHI 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 30
  31. 31. SUMMARY Summary 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 M 2 *2,200 31
  32. 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 32
  33. 33. TARGET RETURN Target return and expected performance for condo conversion strategy CASH-ON-CASH 40% ROE (BEFORE SALES) 80% DISTRIBUTION MINIMUM & TIME FRAME 10% DISTRIB. 3RD YEAR 33
  34. 34. THE TEAM The 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 34
  35. 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 35
  36. 36. 05 THE BERLIN RESIDENTIAL REAL ESTATE MARKET 36
  37. 37. BERLIN IS GROWING DESPITE THE OVERALL ECONOMIC SITUATION 37
  38. 38. 05 THE 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 38
  39. 39. ATTRACTIONS Furthermore, 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 39
  40. 40. RADICAL CHANGE Berlin has experienced a radical structural change from a production location to a well-diversified service location since German reunification 1991 2008 TOTAL 57,428 MILLION EUROS TOTAL 75,523 MILLION EUROS 6% 7% 15% 7% 21% MANUFACTURING SECTOR 9% 5% CONSTRUCTION INDUSTRY 3% TRADE, HOSPITALITY AND 7% TRANSPORT 10% 6% FINANCE, LETTING AND CORPORATE SERVICE PROVIDERS 16% PUBLIC ADMINISTRATION 9% 17% EDUCATIONAL SECTOR 28% HEALTH CARE PUBLIC AND PRIVATE SERVICE PROVIDERS 34% Source: Office for Statistics Berlin Brandenburg, March 2009 40
  41. 41. NEW JOBS New jobs are created in various innovative and growing sectors in Berlin 2% 13% HEALTHCARE TOURISM 30% MEDIA, INFORMATION AND COMMUNICATION TRAFFIC ENGINEERING AND MOBILITY CULTURE 22% ENVIRONMENTAL TECHNOLOGY 11% 22% Source: Engel & Völkers Research & Consulting 2008 41
  42. 42. GROWTH POTENTIAL Berlin has enormous potential for growth Purchasing power per capita in euros (2009) - Berlin has enormous potential for growth 26,000 24,000 EUROS 22,000 20,000 18,000 16,000 MUNICH DUSSELDORF STUTTGART FRANKFURT MAIN COLOGNE HAMBURG HANOVER BERLIN CITY Source: Engel & Völkers Research according to MB Research 2009 42
  43. 43. PEAK RENTS Peak rents for office space in international comparison 1400 1200 Q3 2007 1000 Q3 2008 EUROS 800 600 400 200 0 LONDON PARIS MADRID BERLIN FRANKFURT HAMBURG DUSSELDORF MUNICH CITY 43
  44. 44. OFFICE MARKETS Office markets in national comparison 18,000 HOUSING STOCK LET IN 1,000 M2 16,000 14,000 VACANCY RATE IN 1,000 M2 1,000 M2 12,000 10,000 8000 6000 4000 2000 0 BERLIN DUSSELDORF FRANKFURT HAMBURG COLOGNE MUNICH (CITY) STUTTGART CITY 44
  45. 45. BERLIN VACANCY Berlin has practically no latent vacancy 100% ACTIVE SUPPLY SURPLUS 90% STRUCTURAL VACANCY 80% LATENT VACANCY 70% FLUCTUATION RESERVE 1,000 M2 60% 50% ACTIVE SUPPLY SURPLUS 40% STRUCTURAL VACANCY 30% LATENT VACANCY 20% FLUCTUATION RESERVE 10% 0% BERLIN DUSSELDORF FRANKFURT HAMBURG KOH MUNICH STUTTGART CITY 45
  46. 46. GROWTH POTENTIAL Berlin rents are increasing – but there is still potential for further increases compared to other German cities 12 MUNICH STUTTGART 10 FRANKFURT DUSSELDORF EUROS 8 HAMBURG KOLN BERLIN-WEST 6 BELIN-EAST 4 2 0 1990 1994 1998 2002 2006 2010 YEAR 46
  47. 47. PROPERTY YIELDS German property yields are among the highest in Europe 9 GERMANY FRANCE 8 ITALY YIELD % ENGLAND 7 SPAIN 6 5 4 3 1992 1994 1996 1998 2000 2002 2004 2006 2008 YEAR Source: Engel & Völkers Research according to Feri Research 2009 47
  48. 48. HOMEOWNERSHIP Low homeownership rate in Berlin offers high potential for partitioning apartment block buildings into individual flats 100 HOMEOWNERSHIP RATE % 90 80 70 60 50 40 30 20 HOMEOWNERSHIP RATE OF 13% IN BERLIN 10 0 SPAIN NORWAY IRELAND PORTUGAL POLAND ITALY GREAT BRITAIN BELGIUM SWEDEN FINLAND FRANCE AUSTRIA THE NETHERLANDS DENMARK CZECH REPUBLIC GERMANY SWISS Source: Engel & Völkers Research according to Feri Research 2009 48
  49. 49. PRICES Favourable purchase price level for apartment block buildings 3,000 EUROS PER M2 2,500 2,000 1,500 1,000 500 0 BERLIN DUSSELDORF FRANKFURT AM MAIN HAMBURG COLOGNE MUNICH STUTTGART CITY Source: Engel & Völkers Research according to empirica rental and purchase price ranking in the 3rd quarter of 2008 49
  50. 50. MIGRATION Promising economic sectors and an attractive cultural offer have led to a positive balance of migration in Berlin in recent years 14,000 12,000 MIGRATION 10,000 8,000 6,000 4,000 2,000 0 2003 2004 2005 2006 2007 YEAR Source: E&V Research according to GENESIS Online, Office for Statistics Berlin Brandenburg, 2009 50
  51. 51. HOUSEHOLDS Berlin – increasing number of households predicted due to singularization and new residents moving to Berlin 2,100 HOUSEHOLDS (1,000’S) 2,050 2,000 1,950 1,900 1,850 1,800 2006 2010 2015 YEAR Source: E&V Research according to GENESIS Online, Office for Statistics Berlin Brandenburg, 2009 51
  52. 52. DEMAND Demand for living space per capita is increasing 50 HOUSEHOLDS GERMANY WEST GERMANY EAST 45 GERMANY 40 35 30 25 20 2000 2010 2020 2030 2040 2050 YEAR 52
  53. 53. POOR OFFERING The increasing demand for living space meets a stagnating offer COMPLETED APARTMENTS 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 YEAR Source: E&V Research according to State Office for Statistics Berlin Brandenburg 2009 53
  54. 54. 54
  55. 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% 55
  56. 56. 06 GERMAN INCOME TAXATION 56
  57. 57. WE OFFER TAILOR-MADE INVESTMENT STRATEGIES 57
  58. 58. 06 GERMAN INCOME TAXATION TAX FACTS Special 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) 58
  59. 59. GERMAN INCOME TAX Calculation 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 59
  60. 60. BUY-AND-HOLD Direct Investment (no German SPV) INCOME TAX LEGAL FORM INDIVIDUAL PERSON LIMITED COMPANY INCOME TAX INCOME TAX CORPORATE INCOME TAX (EINKOMMEN / KÖRPERSCHAFTSTEUE) TAX LIABILITY / TAX BASIS 1) LIMITED TO GERMAN-SOURCED INCOME LIMITED TO GERMAN-SOURCED INCOME 26.25% - 44.31% TAX RATE FOR CURRENT INCOME 15.83% 47.48% FOR INCOME EXCEEDING TEUR 250 ASSET DEAL: STANDARD TAX RATE (SEE ABOVE) STANDARD TAX RATE (SEE ABOVE) NO TAX EXEMPTION AVAILABLE TAX RATE FOR GAIN REALISED BY SALE TAX EXEMPTION IF HOLDING PERIOD > 10YRS SHARE DEAL: 2) NOT SUBJECT TO GERMAN INCOME TAX TRADE TAX LEGAL FORM INDIVIDUAL PERSON LIMITED COMPANY TRADE TAX ONLY IN CASE OF PERMANENT NOT APPLICABLE 3) (GEWERBESTEUER) ESTABLISHMENT IN GERMANY TRADING INCOME TAX BASIS NOT APPLICABLE (INCOME PLUS SEVERAL SPECIFIC ADDITIONS & REDUCTIONS) MUNICIPAL RATE FIXED BY THE MUNICIPALITY (E.G. IN BERLIN: EFFECTIVE TAX RATE APPROX. TAX RATE NOT APPLICABLE 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. 60
  61. 61. Indirect Investment (with German SPV) INCOME TAX LEGAL FORM GMBH LIMITED COMPANY GMBH & CO. KG LIMITED PARTNERSHIP 1) INCOME TAX TRANSPARENT FOR GERMAN CORPORATE INCOME TAX (EINKOMMEN / KÖRPERSCHAFTSTEUE) INCOME TAX PURPOSES TAX LIABILITY / TAX BASIS PRINCIPALLY TOTAL INCOME 2) PRINCIPALLY TOTAL INCOME 2) INCOME PROPORTIONATELY ATTRIBUTED TO THE PARTNERS ACCORDING TO THEIR RESPECTIVE INTEREST TAX RATE FOR CURRENT INCOME 3) 15.83% TAX RATE FOR PARTNERS: -INDIVIDUAL PARTNERS: 26.25% - 44.31% (47.48% FOR INCOME > TEUR 250) -LIMITED COMPANY PARTNERS: 15.83% ASSET DEAL: STANDARD TAX RATE (SEE ABOVE) STANDARD TAX RATE (SEE ABOVE) 4) NO TAX EXEMPTION AVAILABLE TAX RATE FOR GAIN REALISED BY SALE TAX EXEMPTION: SHARE DEAL: 5) -FOR INDIVIDUALS IF HOLDING PERIOD >10 YRS GENERALLY NOT SUBJECT TO GERMAN INCOME TAX, - NOT AVAILABLE FOR LIMITED COMPANIES BUT DEPENDING ON DOUBLE TAX TREATY TRADE TAX LEGAL FORM GMBH LIMITED COMPANY GMBH & CO. KG LIMITED PARTNERSHIP 1) TRADE TAX ALWAYS SUBJECT TO TRADE TAX NOT APPLICABLE (6) (7) (GEWERBESTEUER) TRADING INCOME (INCOME PLUS SEVERAL SPECIFIC TAX BASIS ADDITIONS & REDUCTIONS) NOT APPLICABLE MUNICIPAL RATE FIXED BY THE MUNICIPALITY (E.G. IN BERLIN: EFFECTIVE TAX RATE APPROX. 14.35%) TAX RATE ENHANCED REDUCTION OF RENTAL INCOME AVAILABLE NOT APPLICABLE ON REQUEST SO THAT EFFECTIVE TRADE TAX MAY BE REDUCED TO ZERO 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. 61
  62. 62. CONDO CONVERSION Direct Investment (no German SPV) INCOME TAX LEGAL FORM LIMITED COMPANY INCOME TAX CORPORATE INCOME TAX (EINKOMMEN / KORPERSCHAFTSTEUE) TAX LIABILITY / TAX BASIS 1) LIMITED TO GERMAN-SOURCED INCOME TAX RATE FOR CURRENT INCOME 15.83% ASSET DEAL: STANDARD TAX RATE (SEE ABOVE) NO TAX EXEMPTION AVAILABLE TAX RATE FOR GAIN REALISED BY SALE SHARE DEAL: 2) NOT SUBJECT TO GERMAN INCOME TAX TRADE TAX LEGAL FORM LIMITED COMPANY TRADE TAX ONLY IN CASE OF PERMANENT (GEWERBESTEUER) ESTABLISHMENT IN GERMANY TRADING INCOME TAX BASIS (INCOME PLUS SEVERAL SPECIFIC ADDITIONS & REDUCTIONS) MUNICIPAL RATE FIXED BY THE MUNICIPALITY TAX RATE (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. 62
  63. 63. Indirect Investment (with German SPV) INCOME TAX LEGAL FORM GMBH LIMITED COMPANY GMBH & CO. KG LIMITED PARTNERSHIP 1) INCOME TAX TRANSPARENT FOR GERMAN CORPORATE INCOME TAX (EINKOMMEN / KÖRPERSCHAFTSTEUE) INCOME TAX PURPOSES TAX LIABILITY / TAX BASIS PRINCIPALLY TOTAL INCOME 2) PRINCIPALLY TOTAL INCOME 2) INCOME PROPORTIONATELY ATTRIBUTED TO THE PARTNERS ACCORDING TO THEIR RESPECTIVE INTEREST TAX RATE FOR CURRENT INCOME 3) 15.83% TAX RATE FOR PARTNERS: -INDIVIDUAL PARTNERS: 26.25% - 44.31% (47.48% FOR INCOME > TEUR 250) -LIMITED COMPANY PARTNERS: 15.83% ASSET DEAL: STANDARD TAX RATE (SEE ABOVE) NO TAX EXEMPTION AVAILABLE STANDARD TAX RATE (SEE ABOVE) 4) TAX RATE FOR GAIN REALISED BY SALE SHARE DEAL: 5) NO TAX EXEMPTION AVAILABLE GENERALLY NOT SUBJECT TO GERMAN INCOME TAX, BUT DEPENDING ON DOUBLE TAX TREATY TRADE TAX LEGAL FORM GMBH LIMITED COMPANY GMBH & CO. KG LIMITED PARTNERSHIP 1) TRADE TAX ALWAYS SUBJECT TO TRADE TAX (GEWERBESTEUER) TAX BASIS TRADING INCOME (INCOME PLUS SEVERAL SPECIFIC ADDITIONS & REDUCTIONS) MUNICIPAL RATE FIXED BY THE MUNICIPALITY MUNICIPAL RATE FIXED BY THE MUNICIPALITY TAX RATE (E.G. IN BERLIN: EFFECTIVE TAX RATE APPROX. 14.35%) (E.G. IN BERLIN: EFFECTIVE TAX RATE APPROX. 14.35%) NO TAX EXEMPTION AVAILABLE 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. 63
  64. 64. 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! 64
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  66. 66. DHI Deutsche Hauptstadt Immobilien Real Estate Investments GmbHVoßstr. 22 10117 Berlin Germany www.dhiinvestments.com T: +49 (0) 30 33 93 59 40 F: +49 (0) 30 33 93 59 51 E: info@dhi.com 66

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