german-hawk-group
Lessons to learn?
Market Letter #2 '06
At the beginning of 2000 the German developer Köllmann AG started work on a space theme park near Bremen. It was supposed to be one of the first Urban Entertainment Centres in Germany with about 100,000 sqm rentable space including an IMAX, Multiplex cinema as well as a 162 room hotel. Total investment was reportedly some 480 million euro plus a 150 million euro subsidy from the city of Bremen.
It opened its gates in February 2004 and closed them again 7 months later due to a lack of visitors.
Inside Space Park near Bremen
In 2005 the Canadian investor Triple Five allegedly put up 55 million euro for the Space Park, but the deal failed as for some reason Triple Five only made a prepayment of 1.5 million euro.
The Space Park, in professional circles known as Germany’s biggest ´shelfwarmer´, has recently been sold to a London based hedge funds named Cardinal Asset Management. Silence has been maintained about the purchase price.
One of the managers said Cardinal Asset Management intends to redevelop and reposition it.
The Space Park simply highlights what’s going on in the German real estate market and the risks opportunity funds are willing to take.
At the moment we are experiencing strong pressure from international investors to put money into the German real estate market, as everybody thinks the market is under-performing and the time is ripe for recovery. This may be, and in fact seems to be right.
How to take advantage: No matter what real estate investment you make, we strongly recommend solid investments in valuable properties (or properties with good development potential) in cities with attractive future prospects.
Even if, at first glance these investments are not performing exceptionally well, the chances that they will pay off at the end of the day are much higher.
We will see whether the Space Park is going to pay off at the end of the day. We don’t think so, but there is no doubt the yields look quite attractive – at least on the paper.