New special fund with sustainable real estate

HanseMerkur Grundvermögen AG and GBI Capital GmbH in strategic partnership

Hamburg/Berlin, 08/06/2022With the new closed-end special alternative investment fund HMG Grundwerte Wohnen SOZIAL, HanseMerkur Grundvermögen AG (HMG) is enabling the promotion of social objectives within the framework of the investment process. Distribution of the special fund - conceived together with the experts at GBI Capital GmbH - is set to take place soon. Already included in the fund assets are eight projects from the fields of subsidised housing and low-cost student accommodation, whereby the fund target volume is EUR 500 million.

The new HMG Grundwerte Wohnen SOZIAL GmbH & Co. Geschlossene Investment KG (HMG Grundwerte Wohnen SOZIAL) is a closed-end special AIF in accordance with § 285 of the German Investment Code (KAGB) aimed exclusively at professional and semi-professional investors. The fund is a financial product pursuant to Art. 8 of the EU's Sustainable Finance Disclosure Regulation and stands for social investment criteria. Requirements of the Disclosure Regulation include classification of the Environmental and Social approach, and responsible Governance (so-called ESG disclosure). A central condition of investment is the endeavour to make a positive contribution to promoting social integration in real-estate investments. Energy efficiency aspects should also be considered during real-estate construction and operation. To date, the special AIF has invested in subsidised residential properties and student residences.

Of the fund's first eight investments, six are in subsidised housing projects with a total of 331 units in the states of Bavaria and Baden-Württemberg. With the gap between available affordable housing and demand widening for years now, the fund's projects in Bayreuth, Coburg, Heroldsbach, Nördlingen, Villingen-Schwenningen and Würzburg serve to satisfy an urgent demand for housing. The two student accommodation projects - which comprise a total of 369 apartments - are being erected in Hamburg (Theodor-York-Strasse, district of Harburg) and Nuremberg (Lenaustrasse, city centre) and will be long-term operated by GBI's own SMARTments student brand. The construction project in Hamburg's Harburg district also includes a childcare centre with space for 55 infants.

These first eight fund investments belong to the seed portfolio contributed by GBI Capital GmbH (a subsidiary of the project developer GBI) to the collaboration with HanseMerkur Grundvermögen. With regards to future investments, GBI Capital GmbH will continue to deal source and will also be advising HanseMerkur Grundvermögen on all aspects of possible state subsidies, for example satisfying the various approval requirements for public loans or direct subsidies applicable in the 16 federal states, and in relation to KfW finance.

The GBI Group began developing subsidised real estate in 2015 and has since gone on to become one of the leading providers in this sector. The Group's activity focus is also a consequence of its structure: GBI's parent company is the Moses Mendelssohn Stiftung non-profit foundation. The Group therefore possesses particular expertise in real-estate projects that deliver additional social benefits, such as subsidised housing and student residences.

To ensure that environmental aspects are taken into consideration during the management phase, the housing project concept strives to conclude "green tenancy agreements", which can support sustainable action. These agreements include such elements as recommendations to separate waste or to use green electricity. The aim is to provide heating using geothermal energy (wherever geo-thermally and technically possible) and solar systems on the roof, and to implement an energy-efficient home control system.

Ulrich Haeselbarth, deputy member of the HMG Executive Board, explains: “We want to invest in properties that deliver on certain social features and are therefore of benefit to society as a whole. We are now realising this not only for investments made by HanseMerkur, but for over 60 further institutional investors. HMG Grundwerte Wohnen SOZIAL GmbH & Co. Geschlossene Investment KG is focussing in particular on reducing the deficit of subsidised housing in Germany. Furthermore, the investment company intends to use HMG Grundwerte Wohnen SOZIAL to take care of the entire process - from real-estate planning and construction right through to property management and tenant conduct agreements. Given the tense situation on the property market, subsidised housing allows those individuals who would otherwise struggle on the open market to secure housing or accommodation. As such, our partner GBI has opened up an attractive property pipeline for the fund, while also providing us with the expertise we require for the asset class of "subsidised housing"."

Simon Behr, Managing Director of GBI Capital GmbH: "Sustainability is not a temporary fad, but a trend that is set to last. This is underpinned by the requirements of EU taxonomy for future investments, which also provide for the implementation of social standards in investments in the near future. Subsidised housing satisfies the requirements set out by the "S" in "ESG" better than almost every other form of investment. Such real estate is also appealing thanks to permanent full occupancy, a low turnover of tenants and public subsidies that have been fixed for decades. In recent years, our objective has been to make subsidised housing an investment-ready product for institutional investors such as HMG; this is ultimately the fundamental prerequisite for delivering affordable housing on the scale planned by the multi-party coalition.