Art-Invest Real Estate | Asset manager

Art-Invest Real Estate is a vertically integrated real estate investment and fund manager with c. 300 staff and c.135 investments, totaling c. €12.5bn AuM. Our investment arm, Art-Invest Real Estate Management, is one of the largest commercial real estate developers and asset managers in Northern Europe and focuses predominately on large, mixed-use developments and sustainable refurbishments, located in prime locations of Germany, the United Kingdom, Austria and Scandinavia. In terms of asset classes, our focus is on office, hotel, retail and residential core assets, value-investments, and development projects. Our regulated fund management unit has more than 20 actively managed investment vehicles. Our asset management and development teams are regionally organized across eleven local branches.

For our institutional client base, we act as transaction manager, active asset manager, developer, landlord, landlord-representative, property manager, and regulated fund manager (AIFM).

Investment principles & strategy

Since our incorporation in 2010, we focus on “manage-to-core” investment principle (some say Art-Invest Real Estate has coined this term first), in irreplaceable prime locations. Over the last decade, the principle evolved to what we now call Manage-to- Sustainability™ and is still the core of everything we do: anticipating tomorrow’s needs and delivering best in class properties and institutional investment product of sustainable value.

Today, we are one of the largest commercial real estate developers in Northern Europe and an independent real estate investment and fund manager. We continue to focus on prime location for individual assets and well-connected, thriving neighborhoods for our large masterplan developments. More importantly, however, we receive continued and repeated trust from our institutional investment partners through delivering best-in-class properties, returns, and investment management services.

Since our two inaugural flagship funds Manage-to-Core Fund (Evergreen fund, vintage 2012, 3 LPs, fully invested) and Hotel Manage-to-Core Fund Germany (Evergreen fund, vintage 2013, 6 LPs, fully invested), over 20 investment vehicles have been set up, across all sectors and various risk-return profiles. These include separate managed accounts, institutional club deals for large value-add investments with 2-4 LPs, and unregulated direct joint ventures. Art-Invest Real Estate regularly co-invests in total returnoriented projects and offers risk adjustments in the capital stack if desired, i.e. takes first-loss piece.

Sector forecasts

OFFICE: Despite the market uncertainty resulting from multiple crises, the prime office market remains attractive. Vacancy rates are stabilizing and there is hardly any speculative construction. So the fundamentals remain solid, which is also reflected in the still rising top rents for modern ESG compliant office space in prime locations. As the requirements of office users are shifting, workplace design must change significantly, if employers want to remain attractive and offer an attractive office and meeting space to young, talented employees. Since a good 80 % of all offices are only partially in line with the new market, this results in considerable pressure to adapt. This is further increased by ESG requirements for the sustainability of office buildings. Manage-to-sustainability of existing buildings is therefore the order of the day.

RESIDENTIAL: In Germany, the federal government’s targets of building 400,000 flats per year are likely to be missed by a wide margin in the coming years. A housing shortage of over 700,000 units has already been built up. In Austria, the United Kingdom and Scandinavia, where we are also active in the residential real estate development and investment space, we notice similar market conditions. The sharp increase in interest rates and inflation have shattered the dreams of home ownership of many young households in recent months, not least because of the very high housing prices. This pushes the rental market. Here, rents are likely to upward pressure, as the number of not started residential developments will become apparent in low completion numbers in the future. Due to strict building regulations as well as high finance and constructions costs, we expect the number of newly started residential developments to remain low in the short to medium term. Instead, more energy-efficient renovation of existing buildings will take place. However, these will add little additional housing units to the buyers and rental market.

RETAIL: The dwindling purchasing power of consumers as a result of high inflation leads to a further polarisation of shopping behaviour, which favours discounters on the one hand and the luxury segment on the other and leads to a loss of the middle ground. In Germany, this can be still observed in insolvencies and shop closures. Added to this is the pressure from online retailing, which has also become attractive to target groups that previously only shopped in brick-and-mortar stores. As a result, brick-and-mortar retail will again concentrate much more on the high-frequency locations, while new concepts for subsequent use will have to be developed for the secondary locations. At the same time, the development of neighbourhoods is fundamentally ensuring an increasing diversification of the mix of uses. In the future, we will therefore again see significantly more residential uses in the city centres.

HOTELS: The hotel industry has recovered quickly from the crises of the past years. In many places, room rates are at record levels and occupancy rates are only marginally behind the figures for 2019. Meanwhile, the restructuring of the European hotel landscape is progressing rapidly. The number of beds per establishment is rising steadily due to the success of the chain hotel industry. The shortage of skilled workers is also spurring the digitalisation of the hotel sector, for example through self-check-in. At the same time, new hotel concepts are being created every day to meet the individual wishes of their users. Budget hotels are likely to continue to develop dynamically in the future. In addition, the European leisure hotel industry is growing steadily and outperforms the overall GDP development in most markets.

Strategic corporate development 

For over 15 years, Art-Invest Real Estate focuses on commercial and residential real estate developments, repositioning, and value-add investments.

We believe real estate is a local business and our very active management approach needs people on the ground. With our more than 300 asset & fund managers, developers, technical and commercial investment managers, across eleven local offices in Germany, the United Kingdom, Austria and Scandinavia, we take great care of the projects we deliver and the core assets we manage for our clients.

Performance verification 

As an institutional investment management firm and property developer, fiduciary responsibility and institutional-grade performance verification are deeply embedded in our activities. The investment performance is reported and benchmarked on a quarterly basis to our clients. The returns are calculated e.g. in accordance with BVI Return Standards, INREV Guidelines, or in accordance to client requirements and custom benchmarks. The investment performance is audited on an annual basis.

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_{Extensive internal and external control and monitoring mechanisms are in place, including compliance, money laundering, risk management, data protection, antitax avoidance, EU regulation, and ESMA remuneration regulations. We adhere to our code of conduct (available upon request). In addition, Art-Invest Real Estate committed itself to the standard for good and responsible handling of capital and the rights and interests of investors rules of conduct of the German Association for Investment and Asset Management (BVI Wohlverhaltensregeln) and the UN Principles of Responsible Investments (PRI).}