4 Feb 2020 – Scope Analysis GmbH

Scope confirms GLL Real Estate Partners’ rating of AA (AMR).

The rating confirms the company’s very high quality and competence in the asset management of real estate.

The GLL Group (GLL), headquartered in Munich, joined the Macquarie Group in June 2018; forming the real estate equity investment platform of Macquarie’s Infrastructure and Real Assets platform “MIRA”. As of March 31, 2019 MIRA has over 800 employees and approximately USD 129 billion of assets under management, primarily in the infrastructure sector. GLL manages real estate in Europe, the USA, Latin America and Australia with 153 employees spanning 16 offices in 12 countries as of the rating due date (June 30, 2019)

GLL is one of the well-established providers of institutional real estate funds in Germany. Since its inception in 2000, the company has focused, exclusively, on institutional investors having invested over EUR 16 billion in Europe, the USA, Latin America and Australia. Currently, GLL manages 107 office, retail and logistics properties in 23 countries with a volume of approx. EUR 8 billion.

In particular, the consistently above-average industry experience and company tenure both on the management side and on the second tier of management are noteworthy. In organisational terms, clear responsibilities and representation rules have been established. The quality of the investment processes and the risk management, which now incorporates Macquarie’s corporate standards, are of a very high standard.

The IT and process landscape is continuously being revised to ensure progression with respect to efficient processes. The proprietary online reporting tool “AIF Business Platform”, which maps the asset manager’s own direct real estate and real estate fund portfolios as well as third parties since this reporting year, has also had a positive impact on the current rating.

The return on vehicles currently managed by GLL is attractive in the overall context. However, properties acquired immediately before the financial crisis – in particular eastern European assets with value-add strategies – were unable to escape the general market trend and recorded corresponding declines in their value. At the vehicle level, these losses were partly higher than those of comparable fund investments, which ultimately negatively impacted the rating.

The high concentration risk of the client base continues to be viewed negatively by Scope. However, through Macquarie’s platform, GLL has already begun to reduce this risk by utilising the existing broad international customer network and as well as by working in conjunction with their global sales network. GLL has implemented fund level ESG ratings during the reporting period. However, the rating is limited by the fact that GLL does not yet have ESG reporting at company level. Nevertheless, preparations for this are already under way.

GLL’s proprietary office market research tool lays the foundation for investment decisions. It also serves as an integral part of asset management used for the assessment of performance drivers, rental developments, and risk-return profiles; as well as a benchmarking tool.

Since inception, GLL has launched 13 real estate funds, 9 club deals, 9 separate accounts, and 5 AIFM mandates. As of year-end 2018, 1 fund was in liquidation, while 2 funds and an individual mandate had already finished their lifespan – by the end of 2019, one more additional fund will have reached its lifespan.

Although 2018 was marked by liquidations and by funds reaching the end of their lifespans, GLL’s assets under management have nonetheless significantly increased as a result of new institutional investors; including international ones accessed through Macquarie’s network. The transaction track record is very positive. In 2018, attractive sales focusing on core office real estate amounted to around EUR1.1 billion with an average IRR of 7%. Acquisitions in line with the strategy, representing a volume of around EUR700 million were realised. In the reporting period, the company also made its market entry into Australia with 4 properties representing a volume of around EUR 180 million.