02 Oct 2018 – Scope Analysis GmbH

Scope assigns an initial AA (AMR) rating to GLL Real Estate Partners

This rating certifies GLL´s excellent quality and competence in real estate asset management.

GLL Group, since June 2018 part of Macquarie, is based in Munich and manages real estate assets with more than 130 employees in 16 locations in 12 countries across Europe, the USA, Latin America and Australia. The company forms the real estate part of the Macquarie Infrastructure and Real Assets (MIRA) platform, which oversees approximately 94 billion Euros of Assets under Management (AuM), mainly in the infrastructure sector, and employs more than 600 people.

GLL is one of the established providers of institutional real estate funds in Germany. Since the company was founded 2000, it has concentrated exclusively on the institutional sector. Throughout its history, it invested over 14 billion Euros in Europe, the USA, Latin America and Australia. At present, GLL manages real estate assets in the office, retail and logistics sectors with a volume of 7 billion Euros in 17 Countries. Of this total, around EUR 5 billion is currently accounted for by GLL’s own institutional vehicles. The remaining 2 billion includes real estate from asset management mandates, funds of funds constructions and a large AIF mandate, for which GLL Real Estate Kapitalverwaltungsgesellschaft mbH acts as a capital management company (service KVG).

Rating rationale

It is worth highlighting that GLL executives exhibit consistently above-average industry experience and company affiliation both on the top management and second management level. On an organizational level, clear responsibilities and back-up rules have been established. The quality of the investment process as well as the risk management is very high. Furthermore, the “AIF Business Platform”, an online tool developed by GLL, which offers investors online access to their fund data beyond classic reporting standards is a positive rating driver.

The fully integrated research is another of GLL´s strengths. It forms the basis for investment decisions via a proprietary research tool for office markets. It is used as an integral part of asset management in the assessment of performance drivers, rental developments and risk-return profiles, as well as a benchmarking. The link with Macquarie Group will, in the future, extend real estate research with access to a broader macro research. Scope has also taken this into account as a positive driver.

Since its founding, GLL has set up 11 real estate funds, a club deal and 9 separate accounts. Of these, six closed-end vehicles were launched between 2004 and 2012 and five open-end vehicles were launched between 2008 and 2016. At the moment, six funds are close to their maturity date or already at the end of their term. Two funds are currently being liquidated, three are scheduled to mature in 2018 and one in 2019.

The AuM, which will be successively reduced as a result, are supposed to be replenished and further increased by a stronger connection of international institutional investors through access to Macquarie. According to GLL, this should be flanked by joint product development. From Scope’s point of view, this strategy is suitable to effectively meet the challenge of decreasing AuM. GLL has already launched a pan-European multi-investor fund in 2014. Another multi-investor fund, which invests in Europe and the USA, was initiated in order to counter the decrease of AuM already at an early stage. Moreover, GLL already won various individual mandates and set up an Australian fund to expand the AuM.

The investment return on vehicles under management is attractive overall. However, properties acquired before the financial crisis – particularly in Eastern Europe – were unable to escape the general market trend and correspondingly recorded losses in value. At the vehicle level, however, these losses were partly lower than those of comparable fund investments. The two products currently in liquidation reflect this market development.

On the other hand, the high customer concentration risk negatively affects the rating. From Scope´s point of view, there is potential to reduce these risks through the Macquarie platform, both through the existing broad international customer network and the use of the global sales network.

Also, GLL only deals selectively with sustainability issues, which should be expanded and institutionalized even more.