Germany pays back Irish Investors

Most Irish property funds have lost money over the last five years, but one group of commercial property investors have booked a 48 per cent return by putting their money in the German market.

The Third Augusta Syndicate fund, which started in November 2007 with 47 investors and €7.8 million, is now exiting with 48 per cent growth.

That return comfortably beat the performance of both global and Irish stocks over the same period, during which Irish property prices crashed and the price of most assets fell across advanced economies.

The fund was invested in two medical centres in Berlin, where a tightly-regulated market tends to reward investment in income-producing assets over land for development.

"A lot of Irish people came unstuck because Germany is anti-speculation and it doesn't pay to hold anything," said Jerry Purcell, director of Augusta. "Lease lengths are short and inflation-linked, and the market is heavily regulated to keep the cost of tenancy manageable, so it rewards long-term ownership."

Augusta's strategy was to invest - via its own German asset management company - at a high yield at the beginning.

About 40 per cent of the fund's investors are rolling their money into a new Augusta fund, which will begin acquiring new properties as well as wrapping in other Augusta fund assets. "The timing is better now in Germany," said Purcell. "There is a flight to tangible assets. It doesn't hurt that they happen to be in Germany. Germany means security to people."

Source: Sunday Business Post, 4th March 2012