Pramerica forms €120m Berlin residential JV

Pramerica Real Estate Investors (PREI) has teamed up with the founders of Kauri CAB Management, a Berlin-based residential property business, to invest up to €120 million of equity in the German city.

The European arm of the real estate investment management and advisory business of Prudential Financial said in an announcement today it had teamed up with Hagen Kahmann and Julian Brown, who founded Kauri in 2008, with a view to acquiring and refurbishing apartments across the city, Germany’s largest residential market.

In Kauri, PREI has teamed up with a company which provides deal sourcing, acquisition, debt financing and structuring, asset management, property management, rental optimisation and architectural and construction services, it said in the announcement. The firm has 18 staff and is responsible for managing assets valued at approximately €80 million.

The joint venture was struck on behalf of PREI’s PRECO IV fund, which according to news reports at the time of its launch in 2007, was raised with an initial target of $850 million. It has already committed about €24 million of equity to an investment in 13 residential blocks comprising 325 flats.

Philip Barrett, managing director of Pramerica said the joint venture was formed with a view to taking advantage of strong rental growth it is seeing in the Berlin market coinciding with there being spates of ‘under managed’ properties currently which it believes can be bought cheaply. He said: “We believe this market, if approached correctly, presents a significant opportunity to create value for our clients. Our joint venture with Kauri CAB positions us well to take advantage of attractive macro and micro market dynamics currently available in Berlin.”

The tie-up up is the latest in a string of joint ventures formed by PREI in Europe over recent years. It follows July’s tie-up with Groupe Hoche to invest approximately €150 million into homes and offices in Paris; a joint venture with Aros Management to invest €82 million into residential developments in Stockholm in January; a partnership with the Local Shopping REIT to invest €43 million into neighbourhood and convenience retail in the UK; and up to €220 million into a joint venture with US logistics giant Panattoni which invests in central and eastern European industrial properties.

It is also the latest in a number of joint ventures formed by PREI for German investments over the past decade. Others included a tie-up with Mario Bohlen, the former managing director of DeWAG, in 2009 to invest up to €150 million in residential property privatisations in and around major cities in Germany; a similar programme with DeWAG itself which started in 2001 and grew to a valuation of €518 million  before being sold to Archstone Smith, the then-listed US REIT in 2006; and a joint venture with Bauwert Property Group which ran between 2000 and 2006.