Waking up to Germany

In the autumn of last year, veteran UK investor Jim Mellon took some time out of his busy schedule to hunker down and write a book. Titled Wake up!”Survive and Prosper in the Coming Economic Turmoil, the oeuvre, co-authored with entrepreneur Al Chalabi, is not an optimistic tome. As the title suggests, apocalyptic might be a more appropriate modifier.

Writing in The Observer last year, Mellon says, “The Anglo-Saxon housing bubbles are close to popping, and that will drag down consumption—the great driver of the world's economy—by more than anyone now imagines.” In the article, Mellon goes on to predict collapsing stock markets, the demise of Western financial institutions and economic— and possibly military—conflict with China. Read at your own risk.

Though Mellon is sour on the UK and US economies, if his latest business venture is anything to go by, it would seem reasonable to conclude that he considers Germany a much better bet than the Anglo-Saxon market, at least as far as property is concerned.

In late February, Mellon, whose personal fortune is estimated to exceed £200 million ($350 million; €294 millions), revealed plans to use a listed closed-end investment fund to purchase German property on a big scale.

Including leverage, the fund, which is scheduled to float on London's Alternative Investment Market in March, is set up to acquire up to $1.5 billion of residential German real estate. Trading as Speymill Deutsche Immobilien Company, the fund will be managed by Speymill Properties, a listed entity in which Mellon owns a 45 percent stake.

The fund will be domiciled in the Isle of Man and aims to pay a six percent dividend yield once fully deployed.

“The Anglo-Saxon housing bubbles are close to popping, and that will drag down consumption—the great driver of the world's economy—by more than anyone now imagines.”

Flats have been big business in Germany for some time, and Speymill Deutsche Immobilien is bound to run into competition from private equity groups in the UK and the US that have been trawling the country with considerable success in recent years.

Mellon appears untroubled by the prospect. According to reports, his vision is to deploy the fund within 12 months and subsequently raise even more capital for follow-up—$5 billion is the ultimate target total of the spending spree.

Whether Mellon can stick to his timetable remains to be seen. Just don't expect a sequel to “Wake up!” any time soon.

New RE head at Ilmarinen
Finnish Ilmarinen Mutual Pension Insurance has hired Esko Torsti to replace exiting real estate head Timo Kankuri. Torsti, the former chief investment officer for the Pohjola Insurance Group, will head up real estate and private equity investments at the pension. Kankuri, who had been the real estate head at Ilmarinen for eight years, left the pension to join Jaakko Pöyry Infra, where he will be president in charge of building services and telecom business. Ilmarinen has substantial holdings in the residential, office, industrial and logistics sectors, with total real estate holdings valued at more than €2 billion ($2.4 billion).

CapMan appoints new deputy CFO
Nordic private equity and real estate firm CapMan has appointed Kaisa Arovaara as its deputy chief financial officer. Arovaara will also act as a member of the firm's management group during CFO Olli Liitola's sabbatical, lasting through early July. Before joining CapMan, Arovaara worked in the Helsinki and New Zealand offices of Ernst & Young for ten years, as head analyst for the firm's M&A department. CapMan's first private equity real estate fund closed in June 2005 on €500 million ($595 million) and has invested in 18 commercial properties in Helsinki. The fund's most well known investment is the 8,331-square-meter Brondankulma Kiinteistö Oy property, located on the Etelöesplanadi in Helsinki's city center.

GE appoints Thaler as German head
GE Commercial Financial Real Estate has appointed Rainer Thaler as a managing director in the company's German office. Thaler's remit will include GE Real Estate's expansion in Germany, Austria and Switzerland—this includes a focus on the firm's recent residential acquisitions, as well as looking at investments in non-performing loans, the commercial sector, corporate outsourcing and healthcare. Thaler was formerly the chief investment officer at Sireo Real Estate Asset Management. Before that, he worked on M&A, legal and property issues for Deutsche Telekom. GE Commercial Finance Real Estate Germany has real estate investments totaling €275 million ($231 million) in the region.

INVESCO hires new Spanish head
Alejandro Monge has joined global investment manager INVESCO Real Estate as the head of the firm's Spanish acquisitions department. Monge is joining the company from Rodamco Europe, where he was head of real estate investments. INVESCO manages around $23.9 billion (€20.1 billion) in direct real estate assets and publicly-traded REITs, including $6.9 billion in its directly owned European real estate portfolio. Around two percent of the firm's European property portfolio is invested in Spain, where the firm has been investing since 1998. The firm opened a Madrid office in mid-2004 and currently has a Spanish portfolio valued at €100 million.

Apollo takes stake in prominent Liverpool site
Apollo Bannertown, a consortium between Surrey-based property developers Bannertown and US-based private equity real estate firm Apollo Real Estate Advisors, will invest £60 million ($105 million; €88 million) in Heap's Rice Mill, a development in Liverpool's Baltic Triangle neighborhood. The property will be transformed into a four-building residential complex including 391 apartments and 200 parking spaces. It will also include a landmark building overlooking Grosvenor's Paradise Street Development, a new public square and gardens. Bannertown, headed by Tony Beadle, was founded in 1990 by a team of property industry professionals.

Blackstone exits London's Great Eastern Hotel
US private equity real estate firm JER Partners and the Hyatt Corporation have acquired London's Great Eastern Hotel from Conran Holdings and The Blackstone Group. The price of the acquisition, which will be completed in March, was not disclosed. The hotel, located in the City of London, will continue to operate as the Great Eastern until January of 2007, when it will be rebranded under the Hyatt Regency name. Conran Holdings will continue to provide advisory services on all restaurant and private dining operations after the acquisition. The 267-room Victorian hotel was originally opened in two phases, in 1884 and 1901, and was fully renovated and reopened in 2000.

Global Finance invests in Southeast Europe
Global Finance, a Greece-based private equity and venture capital management firm, will invest €140 million ($167 million) developing a business park in Romania's capital of Bucharest. The firm has already acquired 60,000 square meters of property in northeastern Bucharest through its Global Emerging Property Fund. Further details were not provided. The fund was set up last July to invest in business properties in Bulgaria, Romania and Serbia. The fund planned to attract additional debt financing and to invest around €450 million in total.

Kesko to sell 77 properties in Finland
Finnish retailer Kesko Corporation has agreed to sell 77 retail properties around Finland to Niam Retail Holding Finland AB, a joint company composed of Niam Fund II and Crown Asset Management, for more than €200 million ($238 million). All of the properties will be leased back to Kesko's division parent companies for five to 10 years. The properties are scattered throughout Finland, and together they have a total area of 160,000 square meters.

Poalim Real Estate building €40m Romanian mall
Israeli private equity fund Poalim Real Estate has started construction on a €40 million ($48 million) shopping mall in the Romanian city of Constanta. The project will be completed by May 2007 and will cover 55,000 square meters. Constanta, a port and vacation city on the Black Sea, is Romania's secondlargest city with 400,000 residents. This will be Poalim Real Estate's flagship project.