Cross-Border Valuation
TEGoVA European Valuation Conference
Berlin, Friday 17th April 2015
SCHRÄDER & Co.
Key facts
Annual valuations
 founded in 2011
 offices in Cologne and Bonn
 7 staff with diversified backgrounds in
the real estate industry
 approx. 600 single valuations
 approx. 5 portfolio valuations
 approx. € 5 bn market capitalisation
Property types (predominant uses)
office (5 %)
retail (4 %)
residential (72 %)
logistics / industrial (15 %)
hotel (1 %)
health care (1 %)
others (3 %)
Distribution by country
United Kingdom (26 %)
France (19 %)
Netherlands (15 %)
Belgium (11 %)
Portugal (7 %)
Sweden (4 %)
Czech Republic (4 %)
Spain (4 %)
reference cities (Germany)
Cross-Border Valuation
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The need of cross-border valuation
Cross-border investments, 2014 (€ bn)
Largest European invest. markets, 2014
 total European investment volume in 2014: € 218 bn
 European cross-border investment volume in 2014: € 100 bn
 cross-border investors are an increasing driver in the European investment
markets
Cross-Border Valuation
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The Basics of cross-border valuation
Real estate valuation in the European context
 comparable definitions of the market value
(International, European and local standards)
 different methodologies
 focus on income / comparative methods
Cross-border investments - legal framework
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ownership rights
planning acts
building law
tenancy law
tax law
….
Cross-border investments - market / user framework
 local customs (e.g. technical layouts, rentable areas)
 market situation / experience
…
 need of local advisory on legal / technical issues
 market comparables are the key to cross border valuation
Cross-Border Valuation
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Research information
Public data
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brokers
investors
financial institutes
real estate listings (for sale / lease)
local authorities / official statistics
Semi-public data
 research institutes
 business associations
Non-public data
 research by clients
 research by valuer / comparables
Cross-Border Valuation
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Market transparency
Cross-Border Valuation
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Market transparency (London, Paris, Cologne)
Comparables London
London
30.000
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25.000
20.000
15.000
10.000
5.000
0
01/14
04/14
transaction (€/m²)
floating average
07/14
10/14
Comparables Paris
Paris
25.000

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20.000
15.000
10.000
5.000
0
01/14
04/14
transaction (€/m²)
floating average
07/14
Cologne
5.000
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4.000
3.000
2.000
1.000
Cross-Border Valuation
111 office investment deals listed by RCA in 2014
73 deals with applicable information (e.g. sales price)
5.3 billion market capitalisation
72.8 million average deal size
10/14
Comparables Cologne
0
01/14
04/14
transaction (€/m²)
floating average
351 office investment deals listed by RCA in 2014
329 deals with applicable information (e.g. sales price)
24.6 billion market capitalisation
74,9 million average deal size
07/14
20 office investment deals listed by RCA in 2014
7 deals with applicable information (e.g. sales price)
0.5 billion market capitalisation
68.9 million average deal size
10/14
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Market transparency vs. local expertise
Cross-Border Valuation
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Example
Property
Information / documentation
 acquisition in 2013
 central London location
 approx. 32.000 sq.ft. of office space
(single tenant)
 net initial yield: approx. 5,3 %
 market value: approx. € 21 m
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Cross-Border Valuation
full title / building documentation
full set of rental agreements
legal due diligence
technical due diligence
second opinion (market-related)
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Precision of cross-border valuations (1 of 3)
BIIS study: market transactions vs. German OEF-valuations (London)
€/m²
number of valuations
14.000
2000
number of transactions
valuations of German OEF-properties
1750
market transactions
12.000
IPD: City
1500
10.000
1250
8.000
1000
6.000
750
4.000
500
2.000
250
0
Jan. Apr. Jul. Okt. Jan. Apr. Jul. Okt. Jan. Apr. Jul. Okt. Jan. Apr. Jul. Okt. Jan. Apr. Jul. Okt.
2007 2007 2007 2007 2008 2008 2008 2008 2009 2009 2009 2009 2010 2010 2010 2010 2011 2011 2011 2011
0
Note: floating averages (12 month)
Source: RREEF Research, BIIS, RCA, IPD, Dezember 2012 (Morawski/Schräder)
no significant differences detectable
Cross-Border Valuation
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Precision of cross-border valuations (2 of 3)
BIIS study: differences between proceeds of sales and last valuations (German OEF)
Number of valuations/sales:
279
Market capitalisation:
approx. 19.9 bn €
100,0%
80,0%
average total differences: 5.7 %
60,0%
40,0%
20,0%
0,0%
Jan. 04
Mai. 05
Okt. 06
Feb. 08
Jul. 09
Nov. 10
Apr. 12
-20,0%
-40,0%
median total differences: 3,4 %
-60,0%
-80,0%
-100,0%
Source: Morawski/Schräder, BIIS, Dezember 2012
average proceeds of sales predominantly meet last valuations,
but significant differences exist
Cross-Border Valuation
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Precision of cross-border valuations (3 of 3)
BIIS study: single valuation vs. market circle - question of time-delay
€/m²
RCA (median office London)
12.000
valuation object (annual valuations)
valuation object (assumed quarterly valuations)
11.000
10.000
9.000
8.000
7.000
08/11
06/11
04/11
02/11
12/10
10/10
08/10
06/10
04/10
02/10
12/09
10/09
08/09
06/09
04/09
02/09
12/08
10/08
08/08
06/08
04/08
02/08
12/07
10/07
08/07
06/07
04/07
02/07
12/06
10/06
08/06
06/06
04/06
02/06
12/05
6.000
Source: Morawski/Schräder, BIIS, Dezember 2012
quarterly valuations might improve the precision of valutations in volatile
markets
Cross-Border Valuation
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Conclusion
Pros / prospects
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cooperation with a trusted valuer
long-term management of efficient, recurrent processes between valuers and clients
creation of comparable reporting layouts
high transparency to investors
high precision in major investment markets
good understanding of the local (investor-side) framework
Cons / constraints
 limited to fungible / major markets
 increased travel expenses / costs of translations
 local advisory essential
Cross-Border Valuation
13
Aachener Str. 340-346 B
50933 Köln
Tel.: 0221-975806-20
Fax: 0221-975806-33
www.schraeder.eu
Bundeskanzlerplatz 2-10
53113 Bonn
Tel.: 0228-2673-380
Fax: 0228-2673-381
mail@schraeder.eu
SCHRÄDER GmbH & Co. KG
Sitz der Gesellschaft: Köln I Amtsgericht Köln: HRA 29448
Komplementärin: SCHRÄDER Verwaltungs GmbH I Sitz der Gesellschaft: Köln I Amtsgericht Köln: HRB 76424
Geschäftsführer: Thorsten J. Schräder