20. Sep 2018 - Immobilien Zeitung

Higher prices for deal security and discretion

In the transaction figures published by brokers, many sales outside the sphere of bidding procedures are not included. The broker HPBA and bulwiengesa wanted to shed some light on this. They calculated the possible volume in a rough-and-ready manner. Much more exact were the findings from the survey: many players would accept price mark-ups of as much as 10% with off-market deals.

This article was originally published in German only. A summary in English is available.

Summary
One result of the HPBA Off-Market Study, which was based on a survey of 700 market players, is that about 35% of the participants are prepared to pay a mark-up of 5% to 6% compared to bidding procedures, with others prepared to pay even higher mark-ups. One quarter totally rejects such mark-ups. The main benefit of off-market deals, says HPBA managing director John Amram, is having greater deal security without wasting resources. However, notes one expert, more complex deals attain off-market higher prices than structured processes. He also notes that off-market deals are not an alternative for every institutional investor. In addition, he doubts the survey’s figure of 40 billion euros for the volume of off-market transactions. The volume determined by the study is differentiated according to whether the transactions have been made public. As published off-market transactions could also have been included in the on-market volume, the actual off-market volume is likely to be even bigger, says Amram.