GERMAN REAL ESTATE FUND
GUF-I (German Usufruct Fund I) is designed as a safe haven investment strategy, focused on the German real estate market offering unprecedented upside opportunities. Germany is one of the most stable economies in the world, with prime real estate being often labeled as a “recession-proven” investment option.
GUF-I is investing exclusively in Germany, purchasing real estate from retirees while granting them a lifelong right to live in their home (usufruct). The fund purchases therefore the properties with an average of >40% discount and will collect a portfolio of some of the most sought after real estate assets in Germany (off-market properties).
Many retirees are living in villas built on larger plot sizes in some of the most desirable locations in Germany. Very often these homes were built in the 1950s / 1960s and are becoming, because of their location and plot size, a trophy real estate development target.
Retirees in Germany are typically not selling their properties as they want to stay in their homes close to their social network. However, due to the development of pension gaps many retirees are facing financial shortcomings not being able to uphold their quality of life. In addition, they cannot access the financial markets as banks are not allowed to provide mortgage products to retirees.
GUF-I offers retirees to purchase their properties with the option to stay in their homes until the end of their lives and generate enough liquidity to live a high-quality life while also providing financial support to their children and loved ones. One of the major benefits of GUF-I is offering a true solution to asset rich retirees while minimizing inheritance taxes.
The Fund has developed a 3-tier value creation model as outlined below:
Value Add 1: Real Estate will be evaluated by one of the top valuators (e.g. Savills, Knight Frank). Further an acquisition discount will be calculated by a licensed Actuary based on age, gender, condition of the underlying real estate and other criteria. The Fund therefore purchases properties in prime locations with an average discount of >40%. The fund locks in future profits at day 1 of the purchase.
Value Add 2: The Fund is focusing on acquisitions in major German cities with proven high capital appreciation like Berlin. Berlin is one of the most undervalued capitals in the world with tremendous future value creation opportunities.
Value Add 3: Immediately after the purchase the Fund engages the German Building Authorities (Bauamt) and negotiates a higher build up area to be used on the plot. This will allow the replacement, in the future, of a single family home with a duplex or multi family home. This enhancement strategy creates immediate additional value and provides a platform to divest properties with usufruct contracts to developers (immediate divestment option). The fund will not take a development or refurbishment risk. It is a pure land value optimizing strategy.
The fund financials (financial model validated by PWC) target a base-case scenario of a net annual IRR of 12%. One of the major benefits of the Fund is the limitation of the downside risk which can be achieved through the >40% discounted acquisition strategy. Historical models show that the Fund would have returned a net IRR of 11% if it would have been launched in 2007 (1 year before the financial crisis).
Get in touch with us to discuss about how the GUF-I can add value to your portfolio.