ELITE ESTATES SCSp

 ELITE ESTATES SCSp

High Yield real Estate Fund

OPPORTUNITY OVERVIEW 

Elite Estates Partnership (“the Fund”) invests in high-yield real estate developments in Germany, Austria, and Switzerland (the “German-speaking” region), targeting an annual gross IRR of 22% and a net return to investors of 20%.

 

The founders and members of the Investment Committee have combined almost 100 years of experience in the construction and real estate development industry in the German-speaking region. They show their commitment by co-investing EUR 10 million in the Fund.

 

The Investment Committee concluded, that 2024 will be the best moment to acquire distressed/undervalued construction projects in prime locations of German-speaking region’s gateway cities, complete these developments and sell the completed projects to the final users, as the sale prices in prime locations seem to increase year by year.

 

In order to maximize the return for investors, Elite Estates will focus on acquiring projects during the inception phase at the time when building permits are approved and exit the investment after the construction is completed.

20%

Target Return To Investors 

22%

 Target Gross IRR

EUR 10mln

Founders’ Co-Investment

100 years

 of Team Experience

INVESTMENT SELECTION CRITERIA

The Fund has implemented three levels of controls to ensure that the selected project will match the criteria defined in the investment policy

and can be executed to achieve the overall Fund objective

Investment Policy 

  1. Project has a minimum return on investment of 20% (IRR)
  2. Project is located in Germany, Austria, or Switzerland (German-speaking region)
  3. Project is at the initial stage but has received initial approvals for its building permit (outline) or master development plan
  4. Project has a maximum investment of 10% of the total fund size – EUR 20 mil
  5. Project has a minimum investment of 25% of the project value (with operational control) and equity of EUR 5 million

1. Independent Valuation Expert  

The value of any potential project will be assessed by an independent and well-renowned expert valuation company, such as Knight Frank, CBRE, Jones, Lang LaSalle, Savills or Wüest Partners. 

2. KVL Due Diligence

All potential projects will be assessed and rated by Elite Estates’ partner KVL using an in-house-designed project development assessment methodology that focuses on four key-areas:

Project budget and cashflow analysis

Project profitability analysis (IRR, ROE)

Project financing

Real estate market and sales analysis 

Exit strategies assessment 

Assessment of building plans, floor plans, GFA calculations

Assessment of energy, water, and heating  performance

Renovation measures assessment  overview of warranties

Maintenance costs analysis of last 5 years

Verification of project documents (cadastral map, extract from land register, master development plan)

Assessment of building permit incl. final acceptance by the authorities

Outline key points of the strategy

Obtain feedback from tax advisor

Establish project company with standard contracts

Adjust company structure / distribution of profits

3. Investment Committee

The Fund has appointed an Investment Committee chaired by an independent director. The Investment Committee meets each quarter to assess potential projects based on the valuation and outcome of KVL’s due diligence.

 

The Investment Committee should agree unanimously on the acceptance of the potential project becoming an investment.

MARKET CONDITIONS

The crisis in the construction industry will provide lucrative offers to the Fund. The Investment Committee will handpick the most lucrative offers on the market in the German-speaking region key gateway cities with significant supply shortages, profiting from low project acquisition prices and constantly increasing the sales prices of the units.

As is evident from the recent articles published by the Financial Times and Reuters in July and September 2023, Germany is going through a construction crisis, causing construction and development companies to become insolvent. Such developments in the construction industry are beneficial for the Fund, which will be best positioned to acquire undervalued assets from the defaulting development companies at lucrative purchase prices.

At the same time, real estate experts JLL and Deutsche Bank project a supply shortage of residential real estate in key gateway cities in Germany in the coming years. Such a shortage of residential units will drive the sales price in the residential sector further up.

 

Early signs of this increase in demand for residential real estate have already been identified in Berlin by the real estate analytical company Price Hubble.

Rising rates, skills shortages and inflation have pushed developers into insolvency… ,,
Financial Times - 3 Sept ‘23

…financial distress among landlords and builders in Germany have hit their highest levels since reunification three decades ago, intensifying the construction crisis in the EU’s biggest economy…
Financial Times - 12 Sept ‘23

Berlin's residential property market reached its lowest point but is now showing its first signs of recovery in terms of prices. Purchase prices for existing properties are rising again in many districts, and new developments are slowly emerging too.
Price Hubble – 19 July ‘23

Germany's property sector is under stress, prompting firms to call for government support, property developers to file for insolvency and share prices of landlords to plunge.
Reuters – 21 July ‘23

Berlin does not meet future demand.
The forecast average demand for Berlin is around 48 apartments per 10,000 inhabitants p.a. up to 2030.

The fundamental supply shortage should increase
to 167,500 units by 2024.
DB – 21 Apr ‘23