M&G Real Estate Makes First Residential Acquisition in Germany

Strong investor demand for Private Rented Sector schemes in major German cities due to housing shortage
Deal provides investors with good rental growth prospects given limited residential pipeline in Continental Europe

London, Frankfurt, 14 September, 2021 - M&G Real Estate (M&G) has made its first private rented sector (PRS) deal in Germany following an agreement to finance the construction of 230 apartments in Bad Homburg vor der Höhe, near Frankfurt. The funding has been agreed on behalf of the €4.4 billion M&G European Property Fund, managed by David Jackson and Simon Ellis, as part of the Fund’s expansion into residential markets across Continental Europe.

Germany has retained its crown as Europe’s safe haven market in 2020, but population growth and vacancy are the key reasons for the Fund’s investment into the residential sector. In the last decade, Frankfurt and the surrounding region have experienced a strong increase in population, which is forecast to rise by a further 5% by 2030. Vacancy rates are below 1% due to the lack of development of high quality residential accommodation in this prime location, which has limited future development sites.

The deal marks the Fund’s first residential acquisition in Germany, bringing its investments in the country to more than €1 billion across the retail, office and logistics sectors. The Fund will finance three out of the seven construction sites within the Victoria Gärten development, which is located within easy reach of Frankfurt’s central business district.

Classified as a KfW Efficiency House 55¹ Victoria Gärten will use 45% less energy than a standard new building and will be served by a centralised energy efficient heating system serving the entire district. The development, which has been designed to appeal to a wide demographic, will provide step-free 1 to 5-bedroom-apartments, suitable for home working due to their size and layout and will be ready for occupation in 2023.

Thomas Kächele, Director of Investment & Asset Management at M&G Real Estate for Germany, comments: “During the COVID-19 pandemic, the residential sector has demonstrated its resilience across most markets in Europe, with Germany leading the list of the go-to markets and investment volumes into the country holding up year-on-year.

“The pandemic has also shifted the debate on the traditional work-life equilibrium, with living spaces best configured for home working being increasingly sought-after. Bad Homburg has excellent connections to the city and is an area where demand for good quality homes is increasing steadily. The populations of Bad Homburg and Frankfurt are expected to rise over the coming years, making Victoria Gärten a strong asset to respond to this growing demand, offering families and retirees a balanced lifestyle at more affordable rents.”

David Jackson, Manager of M&G European Property Fund, adds: “Like all global markets, Europe has experienced a major economic shock due to COVID-19, with virus containment measures fuelling market uncertainty. Nonetheless, European property continues to offer healthy value spreads over government bonds, with the lower-for-longer era of interest rates expected to remain in the medium term.

“Victoria Gärten is our first residential acquisition in Germany, a key step in the Fund’s expansion into Europe’s residential markets, boosting the portfolio’s diversification between different countries and economic cycles within the continent. This is our fifth European residential acquisition in the last 12 months, bringing the Fund’s exposure to the sector closer to our target of 20%. We expect this growth to continue in the coming months, given our current pipeline.”

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¹ Please find more information of the KFW Efficiency House Programmes here: https://www.kfw.de/inlandsfoerderung/Companies/Energy-and-the-environment/

OpenAbout M&G Investments

M&G Investments is part of M&G plc, a savings and investment business which was formed in 2017 through the merger of Prudential plc’s UK and Europe savings and insurance operation and M&G, its wholly owned international investment manager. M&G plc listed as an independent company on the London Stock Exchange in October 2019 and has €431 billion of assets under management (as at 30 June 2021). M&G plc has over 5 million customers in the UK, Europe, the Americas and Asia, including individual savers and investors, life insurance policy holders and pension scheme members.
For nearly nine decades M&G Investments has been helping its customers to prosper by putting investments to work, which in turn creates jobs, homes and vital infrastructure in the real economy. Its investment solutions span equities, fixed income, multi asset, cash, private debt, infrastructure and real estate.

M&G recognises the importance of responsible investing and is a signatory to the United Nations Principles for Responsible Investment (UNPRI) and is a member of the Climate Bonds Initiative Partners Programme.

Its €45.6 billion property arm (as at 30 June 2021 including cash), M&G Real Estate, is a leading financial solutions provider for global real estate investors, has a sector leading approach to responsible property management and is committed to continuously improving the sustainability performance of its funds.

For more information, please visit: https://global.mandg.com/

OpenDisclaimer

This information is intended for journalists and media professionals only. It should not be relied on by private investors or advisers.

This press release reflects the authors’ present opinions reflecting current market conditions; are subject to change without notice; and involve a number of assumptions which may not prove valid. It has been written for informational purposes only and should not be considered as investment advice or as a recommendation of any particular security, strategy or investment product. Past performance is not a guide to future performance.

The services and products herein are available only to investment professionals and are not available to individual investors, who should not rely on this communication. Information given in this document has been obtained from, or based upon, sources believed by us to be reliable and accurate although M&G does not accept liability for the accuracy of the contents.
Issued by M&G International Investments S.A. in the EEA and M&G Investment Management Limited in the UK. For the purposes of AIFMD, M&G Luxembourg S.A acts as Alternative Investment Fund Manager. M&G Investment Management Limited is registered in England and Wales under number 936683, registered office 10 Fenchurch Avenue, London EC3M 5AG. M&G Investment Management Limited is authorised and regulated by the Financial Conduct Authority. The registered office of M&G International Investments S.A. and M&G Luxembourg S.A is 16, Boulevard Royal, L-2449, Luxembourg. M&G Real Estate Limited is registered in England and Wales under number 3852763 and is not authorised or regulated by the Financial Conduct Authority. M&G Real Estate Limited forms part of the M&G Group of companies.

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M&G Real Estate Makes First Residential Acquisition in Germany

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