Kruno Crepulja is Chairman of the Management Board / CEO of Instone Real Estate Group AG. He has comprehensive experience as an engineer, site manager and project developer as well as a 16-year career on the management boards of large development companies such as Wilma Wohnen Sud GmbH. Kruno Crepulja was appointed CEO of Instone Real Estate’s predecessor, formart, in 2008. Furthermore, between 2011 and 2013 he was responsible for the project development of Hochtief AG in Europe.
1. Thank you for joining the Property Investment Note. Can you provide an introduction to Instone?
Instone Real Estate has approximately 330 employees working at our eight locations nationwide. As of 30 June 2019, our project portfolio comprised 47 development projects with an expected gross development volume of around EUR 5.1 billion and more than 11,500 units. Since February 2018 Instone is listed in the prime standard of the Frankfurt Stock Exchange and since August is included in the SDAX.
2. Could you give us an introduction to Instone’s projects?
Instone develops in the middle to higher price segment attractive residential and multi-family buildings as well as publicly subsidized housing. The company also designs modern urban quarters and refurbishes listed buildings for residential use. Buyers of our apartments are mainly owner-occupiers, private investors with the intention of letting and institutional investors. The average gross development volume of our projects is around EUR 100 million, while the average selling price of our apartments is approximately EUR 430k.
3. What are the main messages you communicate to investors looking to invest in Instone?
Instone is based in the metropolitan regions of Berlin, Frankfurt/Main, Munich, Hamburg, Cologne, Dusseldorf, Stuttgart, Nuremberg and Leipzig. Our positive track record is the result of a 28-year management experience in the development business, a strong regional network and the ability to manage the entire development process with a strong construction background. Our project portfolio of €5.1 billon gross development volume is the basis for our planned significant growth in the next years and fully covers our revenue ramp-up until FY 2022. We will continue to benefit from a favourable German residential property market characterized by a sustainable supply demand imbalance in the metropolitan regions triggering the need for new built apartments combined with high affordability and sustainable house price inflation.
4. How is the investment climate in Germany for residential real estate?
The investment climate for residential real estate in Germany remains positive. The almost zero vacancy rate and lack of adequate rental housing in A-cities and metropolitan regions in combination with very low mortgage rates is stimulating the demand of private investors to fund new residential properties.
Germany is also experiencing an increasing demand from institutional investors. With high-cash stocks, investors are seeking opportunities in the residential sector offering them an attractive investment alternative at relatively good yields. The debate and legislative initiative about rent caps for existing properties in Berlin is also stimulating the demand from private investors as well as institutional investors for new apartments buildings as the will be excluded from any rent caps.
5. Can you highlight recent positive news for Instone?
After a positive operating and financial performance in H1 2019 in line with our expectations, some highlights of the last months have been:
- The inclusion in SDAX in August 2019 only 18 months after our IPO in February 2018
- The acquisition of the residential development activities of Sontowski & Partner Group. With this acquisition, we are extending our footprint to the attractive region of Northern Bavaria and are now covering all metropolitan regions in Germany
- The purchase and forward sale of an approximately €600m GDV project in Frankfurt/Main. This development project will be one of the biggest new urban neighbourhoods in Germany.
- The significantly increased FY2019 guidance taking into consideration this new large project in Frankfurt/Main. And the confirmation of our medium-term revenue guidance until FY 2022 with a full coverage by existing projects.
6. What is the history of Instone?
Instone Real Estate’s predecessor, formart, was established as a business division of Hochtief AG in 2008. In 2014, the private equity fund Activum SG Capital Management Ltd. acquired formart from Hochtief. Focusing on the German residential development market, Activum acquired in 2015 the Leipzig based residential developer GRK Holding AG. In 2017, formart and GRK were merged under the umbrella brand Instone Real Estate Group. In February 2018, Instone was listed in the Prime Standard segment of the Frankfurt Stock Exchange. Following the complete exit of Activum in September 2018, the free float is now 100% with a current market capitalisation of EUR 760 million. Since August 2019, the company is listed in the SDAX. With the recent acquisition of the residential development activities of Sontowski & Partner Group in Northern Bavaria, Instone is now covering all metropolitan regions in Germany. Today’s project portfolio of the company of more than EUR 5 billion has almost quintupled in the last 5 years and is the basis for sustainable growth in the next years.