Asset management challenge changing - German CRE Resolution

Pressure on banks and property owners to manage assets to add value in the wake of the financial crisis is likely to boost the near-moribund German real estate transactions market, says Christoph Wittkop, CEO and co-founder of asset manager CRE Resolution.

Because workouts of assets will become more important for banks that have taken over defaulted or distressed property from debtors," he told PIE in an interview."CRER, part of the listed property group Colonia Real Estate, has set up a workout platform prompted by a request from a large German credit institution that needed a range of services for its newly-acquired real estate. "It's too early to say what kind of business comes out of that but banks are starting to wonder what can they do with the assets," he says. "What we don't see so far is a big firesale wave in Germany... but probably in six months from now we will begin to see the first company insolvencies." What will place pressure on commercial property owners around or just after the turn of the year, he says, is not loan to value covenants, but cash-flow aspects such as ICR and DCR.

Workout fees are expected to constitute an additional revenue stream for the Colonia group, whose primary business is managing its 20,000 residential units, and commercial assets in which it has co-invested. The group owns total assets of e900m, while the total managed, combining both housing and commercial, is more than e2.1bn. Wittkop co-founded Resolution in 2005, and brought it into Colonia later that year. "We are back to the roots now," he says. (Full story in PIE 133 on Monday 7 September)