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Residential - Property in Germany and Scandinavia

German Residential strategy: mid-sized to large cities with positive demographics
Much of what has been said above about student accommodation naturally applies to residential property in general. Again, in order to protect against inflation one needs to buy assets with inflation indexing but, more importantly, where the location and state of the property puts the owner in a strong bargaining position to pass on cost inflation.

We believe these aspects are given in mid-sized to large German cities with positive demographics (positive population growth due to urbanisation is expected to last for another ten years) and in upper middle to top locations. We would only look at properties that appeal to the German middle to upper class where risks of unemployment during crisis are lower and savings function as a cushion against this worst case.

We believe properties in these micro and macro-locations offer superior risk-reward compared to government and corporate bonds, particularly due to the inflation protection characteristic. Further, as housing is an essential good and it is physical we think that German residential provides a very attractive hedge against negative fat tails.

Due to all these points we find it very likely that more and more capital will flow into this asset class. Provided our expectations are correct, we believe this can only lead to a similar result as experienced in other asset classes: Yield compression and capital gains.

We are able to source large-scale Residential property portfolios
Residential property, as an asset class, always suffers from the problem how to acquire efficient investment scale. Buying up individual properties obviously consumes too much time to properly execute an investment strategy.

Consequently, only large size portfolios will do the job. We are very well connected with owners and investors in these portfolios and actively try to construct larger units from owners. We look beyond Germany or markets where we find similar patterns.

For example, we have been looking at top-location Copenhagen residential properties as well as large German portfolios. Further, we currently explore opportunities to find large portfolios of top-location residential properties in Norway and Sweden. We believe that Scandinavia will gain in attractiveness for investors as the story in Germany is largely played and investors move towards the margins. We intend to be prepared for this moment.



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