Institutional Services

Investment

Management

Divestment

Our Track Record

  • Sourcing and acquisition of c. 2 bn € of German real estate for 3 funds
  • Delivered an annual IRR of 24% for one of the world leading sovereign wealth funds.
  • Reduced vacancy from 17% to 3% for a portfolio of 5.000 residential units
  • Value-accretive investment of 140 m € in modernisation and refurbishment of apartments and buildings
  • Complete disposal of 400 m € German mixed-use fund for Swiss private bank
  • Complete disposal of 700 m € Berlin residential fund for institutional investors

Investment – Acquisition Advisory

Thorough preparation prior to investment sets the correct path.

  1. Market Research helps formulate the initial investment thesis – what is the market opportunity?
  2. The investment goals need to be set in terms of
    – target returns
    – risk tolerance
    – time horizon
  3. These goals define the investment criteria for individual holdings
  4. The holding structure needs to complement the owner’s jurisdiction and tax situation
  5. Establishing the investment process and management structure

Throughout this preparatory phase, a constant feedback cycle ensures that the plan is conform to initial investment thesis. 

We have experience across all real estate asset classes. Our focus is development of residential and mixed use properties.

Our extensive network has been built up over 14 years. We have close ties to key market players and institutional investors:

  • Stock-market listed real estate investors
  • State sponsored housing associations and companies
  • Sovereign wealth funds and overseas investors
  • Insurance and pension funds
  • Asset managers and fund managers
  • Real estate brokers and advisors

We command the inside track on off-market transactions…

Magma Rock undertakes the entire DD process, coordinating with sellers, their management providers and our own external suppliers. We focus on the “red flags” – the material risks that jeopardise the validity of the investment. This ensures that time and resources are directed effectively. This accelerated process is an essential advantage in the currently aggressive market.

Our services cover three fields: 

1. Technical

We can quickly and efficiently assess the structural and technical condition of the properties. This covers not just the overall condition, but frames the results in the context of a renovation strategy. Client specific reporting and formats are adopted into our own systems, to minimise resources translating the technical results into client’s own reporting requirements.

2. Commercial

Assessing and evaluating the commercial and economic aspects of the property:

  • rental contracts – residential and commercial
  • rent lists
  • service charge reconciliations
  • macro/micro-location
  • market rents
  • rental restrictions
  • building and zoning restrictions

3. Strategic

Integration of the various due diligence reports into a comprehensive and viable investment case.

A pragmatic and quantifiable approach to risks increases transparency. The SWOT analysis encapsulates all aspects of the property, enabling quick decision-making.

We also undertake the final stages of the acquisition process: 

  • Negotiations in terms of price and conditions – for example, required renovations or rental guarantees
  • Contract drafting in collaboration with the notary and legal teams
  • Accompanying the clients through the notarisation
  • After-Sales service to ensure all conditions are met for a swift transfer of ownership

Management – Investment Performance

Magma Rock’s Fund Management services include:

  • the management of the holding structure
  • ensuring the relevant external contractual arrangements are being monitored
  • coordinating with tax and legal advisors to identify risks and mitigating accordingly
  • managing the various internal corporate agreements
  • ensure statutory requirements are being monitored and managed
  • regular reporting to investors

Our portfolio management service creates a picture of the asset base and monitors its development over time.

Tasks include:

  • analysis of the entire portfolio in terms of operating metrics, market position, technical condition, regulatory restrictions and so on.
  • identifying risks in terms of portfolio weightings – for example, according to use or geography
  • identifying underperforming assets measured by cash flow generation
  • identifying divestment opportunities – for example, if the assets have reached their maximum potential

Portfolio management is the art of continually balancing the portfolio to ensure that it delivers the investment goals.

Asset Management functions on two levels:

1. Strategic

  • Analysing the current performance of the property in comparison with the fund’s investment criteria.
  • Identifying opportunities and risks in relation to market and regulatory developments.
  • Setting the correct strategy for the asset.

2. Operative

  • The implementation of the predetermined strategy.
  • Working in conjunction with other stakeholders and service providers such property managers, tenants, local authorities, architects, etc.
  • Continually monitoring progress against the strategy and adjusting measures according.

Unit / Apartment Level

Renovating or refurbishing units to ensure a swift letting for a good rent. The standard of renovation can be pre-determined in consultation with the client, taking into account the following factors:

  • Overall asset strategy, for example, rental or sale
  • Budget
  • Market conditions and achievable rent- and sales prices
  • Target clientele / tenant base
  • Regulatory restrictions

Building Level

A complete project development:

  • Modernization of the technical systems – for example, heating systems according to the latest energy regulations
  • Improving common areas such as entrance areas, staircases and courtyards
  • Large scale repairs, for example, to roofs.
  • Creating additional usable area through roof conversions or new builds on adjoining land

Divestment – Disposal Advisory

The decision to sell a property should start long before the call to the broker.

Ideally, the asset being sold has enhausted its potential in its current life cycle and can generate maximum returns on exit. Before we recommend the disposal of any asset we perform an analysis of the current performance and outstanding opportunities and risks.

We formulate a plan to maximize the value and potential sales price, and implement the required measures.

Three steps are undertaken before any marketing starts:

1. Data Collection

  • Collection of data and information required for due diligence process.
  • We work hand-in-hand with the data providers, such as the property management, to ensure the information is up-to-date, relevant and complete.
  • Compilation of a comprehensive online data-room.

2. Identify Target Buyers

  • Identification of target groups, based on the investment’s characteristics and seller’s time scale and preferences.
  • Compilation of long list of potential purchasers based on our market knowledge and network.

3. Preparation of Marketing Material

  • Composition of a professional Sales Expose that hits the trigger points of the chosen target group.
  • Compilation of Information Pack, with the essential information regarding the assets and holding structure.

Magma Rock offers a customised marketing process based on client preferences. There are two overarching approaches, which can be combined to create the most effective sales process for the asset:

1. Off Market

Often the preferred method for sellers seeking discretion, transactions are introduced directly to a selected group of potential purchasers. This avoids spreading the portfolio widely across the market to many unsuitable buyers. This targeted approach increases the portfolio’s attractiveness to more serious investors. Amongst investors, off-market transactions have a number of empirically proven benefits:

  • Above average prices – buyers are willing to pay a premium of up to 5% for the additional security an off-market transaction offers.
  • Higher closure rates – buyers are more committed to the transaction process
  • A faster process – the process is focused on key buyers

2. Open Channel

Transactions are marketed through open channels (e.g. online platforms) to reach a wide number of possible buyers.

This ensures the widest reach and can unlock potential buyers, who are otherwise overseen during off-market transactions.

This can lead to higher prices, but risks excluding some of the more serious investors.

The final stage of the sales process consists of 3 concessive phases:

  1. Negotiation on prices and conditions
  2. Contract finalisation in conjunction with the legal teams and notary
  3. After-sales services to ensure all conditions are met

These last phases of any transaction are the most decisive. Many years experience in closing transactions enables us to calmly find common ground to satisfy the needs of all parties.

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