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German CMBS enjoys boom time

CMBS has been flying in Europe, nowhere more so than in Germany, which had a dramatic year in 2006. So fast did the market move that this year it is struggling to maintain such a relentless pace. Observers, though, believe there is still plenty of potential over the long term. Phil Moore reports.

Can corporate supply keep pace with demand?

Henry Cooke, a managing director in the real estate group at Barclays Capital in London, describes the shift in real estate ownership taking place in Germany as "staggering".

That metamorphosis is occurring at a number of levels. First, it is being underpinned by corporate and municipal entities looking to unlock value from property holdings peripheral to their core businesses or responsibilities.

E.On’s sale of its portfolio of 150,000 apartments to Terra Firma in 2005 has been the most conspicuous example, not least because at €7 billion it was the largest private equity transaction ever completed in Germany. But at a more micro level, bankers say plenty of other corporate portfolios are changing hands almost daily.

Second, bankers say that the transformation in the ownership structure of European real estate is resulting in large cross-sections of German property being acquired by international investors. According to figures from Jones Lang LaSalle, 2006 was a record year for commercial real estate investment in Europe, with continued buoyant demand leading to volumes amounting to €242 billion in 2006, a 39% increase on 2005.

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