AEW has invested €30m in senior secured debt financing for the purchase of a 40,000 sq m office block in Munich, the third-biggest office real estate market in Europe.

The investment is part of a senior loan totalling €147m to Blackstone, the deal sponsor, with a loan-to-value (LTV) of slightly below 60%.

This property underwent significant renovation in 2012 and is currently 85% occupied, with 26 separate tenants.

We like the leasing profile. A number of good tenants in such a dynamic market as the Munich market tend to provide more resilient cashflow than a single tenant,” says Sylvain Deschamps, debt fund manager at AEW, an affiliate of Natixis Investment Managers.

Given the trend witnessed in Munich over the last few years of higher rental income and the low supply there is high reversion potential for rental income, given that the rents paid for tenants in the Munich property were set years ago. The Munich real estate market has indeed very low historical vacancy rates of less than 5%.

The Munich market also has inherent ESG advantages, with most properties in the city served by an electricity network which is powered by geothermic energy. “We see this as a clear advantage as the energy and environmental performance is at the core of our risk analysis,” says Deschamps. AEW, in common with its peers, will file an annual ESG report for the first time in 2023, under the European Union’s Sustainable Finance Disclosure Regulation (SFDR).

This deal allows us to strengthen the share of German properties within the portfolio,” says Deschamps. “After this transaction and a recent one in central Paris, Germany and France will represent 60% of our portfolio, in line with our original target.”

Following this transaction and the previous deal in Paris, the AEW team has deployed more than 80% of its commitments. “It’s been a really strong 2022 so far,” adds Deschamps.

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An affiliate of Natixis Investment Managers
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Real-estate investment manager under n°T 8324 delivered by the Prefecture de police de Paris.
Share capital: €17,025,900
RCS Paris: B 409 039 914
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