Munich-based ZAR Real Estate plans to invest €300m in residential portfolios

Munich-based ZAR Real Estate, a fully integrated developer and investor for property projects operating throughout Germany, is planning during 2024 to invest €300m for the acquisition and refurbishment of residential portfolios.

ZAR Real Estate currently has 10 running projects, with €3.5bn under development.

The property business recently signed 11,000 residential portfolios, said Martin Hofmann, CEO and managing director of ZAR Real Estate told Investment International.

"We have  a large appetite to acquire more, for 25,000 residential units, which we hope to acquire over the coming months", he said.

He added that ZAR Real Estate is "currently in discussions with a number of UK/ international institutional investors and partners about the potential offered by the German residential market".

It focuses on the acquisition of attractive properties in major German cities with the aim of  creating sustainable, liveable living and working spaces by developing modern and attractive urban neighbourhoods.

ZAR's new "Manage to ESG" strategy provides for the nationwide acquisition and serial refurbishment of existing residential properties with significant potential for value appreciation.

The company said it has a proven track record in enhancing the value of assets through its “Manage to ESG” strategy together with its expertise in project development.

Hofmann said that now is a very good time to invest in Germany’s top seven cities and mid-sized cities against the backdrop of a decreasing supply of residential construction projects.

"In light of anticipated population growth in Germany, the country will need 400k residential properties by 2030", he said, adding that Germany's  population is expected to increase 2m by 2030 as "home ownership pushed out for many, bolstering the rental market".

"Our USP is that we have identified a partner who works with us to make our properties ‘fit for 55’ (EU target of reducing net greenhouse gas emissions by at least 55% by 2030) and helps us get the units up to A Grade standard in terms of EPC ratings.

"Our approach to the EU Taxonomy’s approach to EPC ratings (getting assets from E grade rating to A grade rating) is completely brand new to the industry as ‘Manage to Green’ is too expensive for many.

More specifically it:

- Aims to get assets from E to A within 24 months.
- Reduction of CO2 emissions. No stranding asset until 2045
- Saving in energy costs and CO2 taxes for both, landlord and tenant
- No ESG Capex. The contracting partner invests in the installation and operation of the necessary hardware, without investment by property owner. The property owner is charged a usage fee instead of upfront capital outlay.

Hofmann said "We started this approach in mid-2023 having identified the best partner to work with.

"We are purchasing assets from institutional investors – some of them are unable to reposition their assets to meet EU Taxonomy standards due to affordability, or they may have refinancing issues so need to sell off assets.

He highlighted that his company often buys at a big discount – typically between 25% to 30% - "and we have a positive cashflow in our portfolio.

"Our finance structure is currently very German focussed but we are receiving significant interest from UK based institutional investors."