Euro am Sonntag interview: Fund experts Schttauf and Sebastian: “The office segment is more at risk” | message
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by Christoph Platt, Euro am Sonntag
M.ario Schüttauf is in charge of 16 billion euros. The fund manager controls the fate of hausinvest. Commerz Real’s open-ended real estate fund has just started its 50th year and owns 153 buildings worldwide – mainly commercial properties such as offices and retail, but also residential buildings. Steffen Sebastian is Professor of Real Estate Financing at the International Real Estate Business School at the University of Regensburg. One of his main focuses is indirect real estate investments such as funds or REITs. € uro am Sonntag spoke to the two experts about the consequences of the pandemic on the various real estate market segments, how hausinvest is dealing with the situation and questionable trends.
€ uro on Sunday: Mr Sebastian, the corona pandemic is primarily affecting retail and hotel usage types because their tenants are coming under pressure from lockdowns. What effects do you see here on the real estate market?
Steffen Sebastian: There is no such thing as retail or the hotel segment as a whole. Every property is unique and has to be assessed as an individual property. Corona has not changed anything fundamental in the market – the pandemic has only accelerated developments.
What do you mean?
Sebastian: Even before the pandemic, for example, there were business hotels that were getting on in years and at the same time were very expensive. Even before Corona, one asked oneself: Does this concept still work? And now it has been shown all the more quickly: it will no longer work.
This is all the more true for retail.
Sebastian: Yes, it’s similar there. An older shopping center, for example, which had to struggle in the years before Corona as a result of competition from online retail, has now crashed very quickly during the crisis.
Mr. Schüttauf, about ten percent of the hausinvest you manage is invested in hotels and 24 percent in retail properties. Does that affect the return?
Mario Schüttauf: The upheavals that we have suffered are absolutely limited. Only one building, a boutique hotel in New York, saw a major devaluation at the beginning of the pandemic. In Heidelberg we had to part with a hotel operator, but we immediately found a new tenant. In retail we have mostly found solutions by deferring the rent. At some locations we have agreed a higher share of sales, which should have a positive effect on our income when the stores are permanently open again. In the past twelve months, we have achieved a return of almost two percent despite Corona. We are satisfied with that.
Are you planning to reduce your involvement in both segments?
Schüttauf: Retail properties and hotels have always been an integral part of hausinvest. This will remain so. We think the current difficulties are only temporary and will not become a permanent condition. If you look to other countries with faster vaccinations, you can see that the situation is improving rapidly. In the USA, for example, hotels are open again and occupancy is increasing.
Have there been any transactions in hausinvest in the past 15 months that were due to the pandemic?
Schüttauf: No, the pandemic wasn’t a trigger – neither for purchases nor for sales. We have a very strong corona-resistant portfolio and were therefore able to make the time a little more worry-free.
What makes you so confident?
Schüttauf: In the years before, we made many fundamental decisions that are now paying off. We already dealt with residential real estate in 2019 and decided to include this type of use. There are now around 1,600 residential units in the portfolio, which has a very stabilizing effect. We parted ways with crisis-prone situations before 2020. In addition, we market our properties in very small parts – and the more small-scale you manage, the more flexible you are.
In many classic open-ended real estate funds – including hausinvest – office buildings have the largest share of assets. Will there be a change in this segment because work in the home office will solidify?
Sebastian: Of course, there will be one or the other company that will strive for more home offices. But the idea that employees in the office only need one table and one chair in constant change in order to make better use of the space will not come about that way. If the pandemic has shown anything, it is that people miss their office, their permanent place of work. Therefore, the need for office space will not decrease.
Not even if more and more companies go bankrupt as a possible consequence of the lockdown?
Sebastian: Yes, of course. Depending on how severe the economic slump will be, we will see effects. The office segment is more at risk from the economic corner than from the fashion theme of home office. But a look at Great Britain, for example, shows that the economy is picking up again as vaccination progresses. That makes me feel positive.
What about logistics real estate? In addition to apartments, this type of use is currently considered to be particularly promising. Hausinvest has invested little money there.
Schüttauf: I have to admit, this trend has passed us by. However, it is out of the question for us to step up now. The high prices that are currently being charged are not justified and the level of returns is inappropriately low. That doesn’t fit with hausinvest. Inner-city last-mile logistics, however, is a different topic, which we generally consider to be very exciting.
All-rounder: Hausinvest is active worldwide. Half of the capital is in German properties. The fund invests in all types of use, offices are most strongly represented.
Image sources: Photo montage: Commerz Real, Christian Buck / University of Regensburg