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"Commerz Real AG completed the 2007 financial year – in which it was created by merging Commerz Grundbesitz Gruppe and CommerzLeasing und Immobilien AG – with improved earnings and a markedly increased volume in new business. Thus, even the year of the merger saw consistently continued growth for either legacy company.
Commerz Real combines two complementary business models, each with a successful track record of many years, the idea being to develop an integrated perspective of assets and investors in a highly competitive and dynamically growing environment. The business spectrum includes the investment products of open-end real estate funds and closed-end funds, the area of structured investments with a wide range of customised structured financing concepts, and the equipment leasing business.
With 44 billion euros in assets under management, Commerz Real is one of the world’s leading real estate asset managers and providers of leasing and investment solutions. The real estate segment accounts for 33 billion euros worth of assets under management. The merger achieved an excellent position in this area, creating the basis for an increase in the acquisition and sales performance.
"The new setup provides us with far more options for using a wide product spectrum and an expanded access to the market to bring attractive real estate objects in touch with prospective investors," elaborates Hubert Spechtenhauser, CEO of Commerz Real AG. "Moreover, it is a pleasure to realise that we were able to continue the successful development of our business even in a year where the merger caused particular strain on our resources."
New Business Enhanced in all Business Areas
The new business the company realised in 2007 came to a volume of 7.2 billion euros. This means that the legacy companies’ aggregate value of the previous year (3.7 billion euros) was nearly doubled. Investment products accounted for a total share of 4.0 billion euros. The business area of structured investments realised new business with a total value of 1.7 billion euros. New business in big ticket leasing totalled 1.5 billion euros.
Substantial Increase in Profits
In 2007, earnings perked up noticeably as well. The result before taxes equalled 140 million euros. In other words, it topped the legacy companies’ combined results of the previous year (totalling 98.3 million euros) by more than 40 percent. This hike is attributable above all to the massive expansion of the assets under management, and to a significantly boosted acquisition activity. On top of that, the retransfer of valuation reserves produced an extraordinary profit of 25.8 million euros.
hausInvest Funds: High Increase in Performance
The hausInvest funds saw a net inflow of capital in the amount of 1.7 billion euros during the reporting year. They purchased real estate in a combined volume of approximately 1.5 billion euros. The volume of the hausInvest funds, reflecting the commitments of more than 500,000 investors, totalled 11.4 billion euros by the key date, 31 December 2007. The foreign real estate share equalled 82.3 percent for hausInvest europa, and 96.4 percent for hausInvest global, a fund investing in Europe, North America and Asia. Higher rent revenues and appreciations precipitated a positive yield development for either fund. Specifically, hausInvest europa scored a 7.4 percent performance, and hausInvest global a 5.6 percent, performance by the end of 2007 (on an annual basis, pursuant to the BVI standard), after 3.8 and 5.0 percent, respectively, the year before. The year also saw the first-ever acquisitions of real estate in South Korea and Singapore. In Japan, by contrast, hausInvest global (launched in 2003) has been committed since 2006.
The institutional real estate funds of Commerz Real also expanded their business volume. For its institutional investors, the company manages six funds with an aggregate volume of 1.7 billion euros, and all of these funds report a sound performance.
Successful Placement of CFB Funds<7b>
Yet another segment reporting increases is that of closed-end funds. Here, the investor capital rose to 4.6 billion euros in 2007, breaking down into 165 placed funds, and showing a combined investment volume in excess of 11.6 billion euros. More than 62,000 investors have subscribed 115,000 participations so far. Funds placed in 2007 include CFB-Fonds 60 "Comcast Center" in Philadelphia with an investment volume of approximately 516 million US dollars, and the ship funds CFB-Fonds 61 through 163 with an aggregate volume of approximately 226 million US dollars.
The CFB-Fonds 164 "Asia Opportunity I" (total investment volume: approx. 273 million US dollars) that offers investors a participation in the institutional Asia portfolio of LaSalle Investment Management, and the CFB-Fonds 165 "Euro Alsace Paris" with an investment volume of 160 million euros, each reported a successful start of sales.
The premature sale of the two ship fleets CFB-Fonds 139 and CFB-Fonds 1o46 flushed out returns of 210 and 185 percent, respectively, for their investors even after their short terms. Commerz Real invested another 2 billion US dollars in vessels that will be offered as closed-end funds in the coming two years. In the future, Commerz Real will moreover concentrate on the core area of real estate and the development of renewable energy funds.
Innovative Financing Models in the Business Areaof Structured Investments
In the service area of structured investments, business activities focused on balance structure management for commercial enterprises, and on public-private partnership projects (PPP) for the public sector. Business in this segment was also expanded in 2007, one example being contracts with a total volume of 400 million euros that were signed with several health insurance companies toward the cession of usage rights for about 70 properties.
In addition, Commerz Real signed an agreement with Tishman Speyer on the realisation of a new high-rise in the Kaiserkarree area in Frankfurt’s financial district, as well as an agreement on the construction and letting of the new group headquarters for Premiere AG in Unterföhring near Munich. Structured financing deals on the order of 75 million euros were also signed, involving eight regional aircraft for US airlines.
In the area of PPP developments, Commerz Real participated in broad-based public tenders for several complex projects. These include the Elbphilharmonie, a PPP with the City of Hamburg for the construction of a concert hall in Hamburg’s HafenCity area. The construction volume comes to 241 million euros. Meanwhile, carcass construction for this project is well underway, and the building is scheduled to be completed by 2010
Fast-Paced Growth in Equipment Leasing
Against the background of the positive investment climate, Commerz Real managed to raise the volume of new business in equipment leasing by more than 30 percent compared to the previous year. Thus it continued a growth course that has topped the market average for years. The positive development was fuelled by the continued expansion of the cooperation with Commerzbank in the corporate client business, and by the intensification of third-party sales. Within the framework of its foreign activities, BRE Leasing once again contributed significantly to the development of new business, and reinforced its position as one of Poland’s three top leasing companies. The main goal in big ticket leasing is to increase the new business volume further. The means to achieve this end will be an expansion of sales activities and the intensification of the sales cooperation with Commerzbank.
Merger Swiftly Transacted
By the end of 2007, Commerz Real had essentially concluded the merger, which had been announced in May of the same year. "In the context of the ongoing merger, one of our essential goals was to keep the repositioning phase as brief as possible," said Spechtenhauser. "This was important to us with a view to the business development, but also specifically in regard to the motivation and the faith of our staff, who supported the process with a great sense of commitment from the start."
Internationalisation and Expansion of the Product Spectrum
In the coming years, Commerz Real will primarily seek to complete its product spectrum, and to expand its international business. "Last year, we drastically deepened our commitment in the areas of both open-end and closed-end real estate funds in Asia. We intend to bolster our position in that region as well as our activities in other fast-growing markets," said Spechtenhauser, elaborating the company’s plans. In Europe, Commerz Real will focus mainly on France and Scandinavia, in addition to the German market. At the same time, it also monitors developments in central and eastern European countries with keen interest. Another focus is the expansion of the asset management for institutional investors inside and outside Germany.
"Yet our deliberations are not limited to the fund business. With German Office AG, we formed an entity that invests in real estate on selected German office markets. Strategic options for German Office AG include a future IPO and the conversion into a G-REIT. This, however, would require a positive capital market environment. As far as investment products are concerned, our focus rests – aside from the real estate markets – in particular on the prospering area of vessels and will increasingly come to rest on assets such as aviation and renewable energy," Spechtenhauser added.
"As already announced when Commerz Real presented itself in September 2007, we wish to further expand our market position, and to push the volume of assets under management beyond the 50 billion euro mark by 2010. The benchmark planned for the operative result by that time is to exceed 150 million euro," said Spechtenhauser as he profiled the longer-term objectives of Commerz Real. "The main measures used toward this target include the completion of the product and asset spectrum, as well as the steady intensification of the international orientation by developing new markets and widening the investor basis."
Commerz Real AG is a fully owned subsidiary of Commerzbank AG, Germany. With approximately 44 billion euros in assets under management, it is one of the world’s largest real state asset managers and providers of leasing and investment solutions. Commerz Real focuses on the provision of investment products, such as open-end and closed-end real estate funds, institutional real estate funds, REITs, closed-end funds for ships, aviation, and renewable energy. The spectrum of services includes moreover the area of structured investments, which combines the activities of real estate leasing, big-ticket leasing, and structured financings, as well as equipment leasing" (CS della Società).
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