The real-estate arm of German insurer Allianz expects to be able to boost its portfolio in 2010, thanks to asset sales from cash-strapped competitors struggling with a lack of credit, its CEO said.
-- 2010 should see more sellers after quiet 2009: Allianz
-- Prices may not fully take off until after 2012
-- Targets more retail assets, more non-euro exposure
The increase in European commercial property transactions should allow Allianz Real Estate to meet its target of around 1 billion ($1.49 billion) to 2 billion euros in annual investments, Chief Executive Olivier Piani told Reuters.
"The bulk of so-called opportunistic property funds that bought assets in 2006, 2007, 2008, are in trouble," he said. "I think that starting in 2010...we should see more real sellers than we have seen so far." There have been few sellers so far this year in Allianz's main markets of France and Germany, according to Piani, because property investors there mostly avoided the debt-fuelled excesses during the market's boom years and are reluctant to take losses on what they see as a temporary price correction.
For 2009, Piani expects Allianz Real Estate to report less than 500 million euros' worth of transactions, far short of the expected 1-2 billion-euro level.
But he said debt maturities in 2010 and a lack of easy access to credit would pressure certain types of commercial property holders, mainly developers and funds, to sell up.
Despite the expected pick-up in asset sales, Piani said property prices might not fully turn around until 2012.
"We are technically out of recession in France and Germany, but we are not out of the (economic) crisis," he said, citing rising unemployment and public debt levels.
He said property prices might only start taking off again after a period of stabilisation in 2011-2012. Office and retail rents would fall going into next year, he said. Piani said he preferred taking a long-term view, over the next three years, when deciding on investments.
Allianz Real Estate, which had around 17 billion euros in assets under management at end 2008, is in the midst of a strategic turnaround to reduce its exposure to office property - currently 70 percent of its portfolio-and increase retail property exposure, currently at under 5 percent. Piani also said it aimed to reduce its exposure to Europe, which accounts for 95 percent of its portfolio, to around 70-80 percent, and increase investments in the United States and Asia.
Although real estate currently accounts for 3-4 percent of Allianz' total assets under management, the insurer wants to raise it to 6 percent in the next three to five years.