• Target audience: First-time sellers, heirs, water cooperatives, municipalities, forestry companies
• Purchase: Drinking water starting at 1 billion liters/year (developed), 5 billion liters/year (undeveloped), healing and mineral springs separately
• Sale method: 99 % off-market — discreet, anonymous, direct
• Regions: Europe & USA, waiting list available

Water Source Classification: What Exactly Are You Selling?

Before anything can be said about ratings and buyers, the source must be legally and qualitatively categorized. The sales price per liter of production capacity differs between the classes by a factor of 5 to 20.

An Overview of the Four Source Classes

The legal classification of the source is the greatest single value lever. A state recognition of a healing spring can multiply the source’s value tenfold — the recognition itself is not tradable, but is tied to the source and thus part of the asset deal.

Water Rights Permit and Authorization — the actual asset

The subject of sale is legally divided into three parts: plot, source (as part of the plot), and the water rights usage right according to §§ 8 ff. WHG. The latter determines the value. A “permit” (§ 10 WHG) is the strong, long-term form — usually limited to 20 to 30 years, secured in rem, and transferable. An “authorization” (§ 8 WHG) is weaker and can be revoked at any time.

• Maximum allowable abstraction: has the approved amount been fully utilized or is there potential for an increase?
• Remaining term: a remaining term of 5 years significantly reduces the price, while 25 years is premium
• Transferability: not every permit is person-independent — essential to check
• Protected Area Designation: Water protection zones I/II/III increase security, but restrict land use

Rating: How the value of a water source is really calculated

The widespread misconception: “Annual revenue = purchase price”. Wrong. Investors evaluate sources through Discounted-Cash-Flow or EBITDA multiples — because promotion, processing, bottling, and logistics cost money. What matters is the sustainable cash flow that can be generated.

The realistic valuation approach: EBITDA multiple

Calculation example for an established spring water source with its own bottling, approved extraction of 1.2 billion liters per year:

When evaluating pure source rights without bottling, it is assessed on a royalty basis: 0.8 to 2.0 cents per bottled liter over the remaining term of the permit, discounted at 6–9%. An untapped source with a potential of 5 billion liters per year and 25 years of remaining permit can quickly reach double-digit million values.

Weighting of Evaluation Factors

• Water rights permit (35 %): Remaining term, quantity, transferability
• Water quality & mineralization (20 %): Analytics, stability over decades, healing spring status
• Deposition & climate resistance (15 %): historical data 30+ years, behavior during dry periods
• Infrastructure (15 %): transport connections, port, rail, power supply, filling facility
• Location & sales market (10 %): distance to urban areas, export options
• Plot & development (5 %): workshop, warehouse, expansion areas

The famous location also plays a role here, although weighted differently than in residential real estate — the decisive factors are the distance to logistics hubs and the distance to competing sources.

Hydrogeological report: the central document

Unlike in the classic real estate sale, a valuation report is not sufficient. Buyers require:

• Hydrogeological report from an accredited expert office (catchment area, renewal rate, climate projections)
• Settlement history of at least 10, ideally 30+ years
• Full analysis according to the Drinking Water Ordinance or Minimum/Table Water Ordinance including trace substances and PFAS
• Soil report and brownfield research in the catchment area
• Confirmation of the water rights permit by the competent authority

Buyers of water sources: Who buys, with what motivation, in what size range?

The buyer circle is small, well-capitalized, and international. Anyone selling without a real estate agent network reaches at most 5 % of the realistic buyer circle.

The five buyer types at a glance

Off Market: The Only Serious Sales Channel

Water sources are not advertised. The sale takes place in a structured process through specialized off-market real estate agents:

1. Anonym teaser (1–2 pages, without identification of the source, only key data)
2. Signing of NDA by interested investors
3. Information Memorandum (40–80 pages, full profile with appraisal)
4. Indicative offers (non-binding offers, range)
5. Management presentation & site visit with top 3–5 bidders
6. Due diligence via data room (legal, technical, hydrogeological, tax)
7. Binding offers with contract draft
8. Exclusivity agreement with the highest bidder
9. Signing & closing at the notary

Advantages Off Market: pre-approved financing confirmation, personal network, discretion and anonymity, no reputation damage if the property doesn’t sell, faster process until purchase contract and notary.

Leverage Points That Sellers Must Know

• Earn-out: A portion of the purchase price is tied to the amount of production or revenue achieved in the following years
• Quantity Guarantees: The seller is liable for a minimum production — can be useful, but can also become expensive
• Reversion: The seller retains 10–25 %, benefiting from value appreciation
• Locked Box vs. Closing Accounts: Cut-off date balance or closing balance — a million-dollar question for large deals
• Approval Conditions: Price adjustment if the water rights approval is extended

In the high price segment, even 5 % fluctuation is a big risk. Without expertise, sellers often lose 10 to 20 % of the achievable price in negotiations — for a 200-million-asset, that’s 20 to 40 million euros.

Process: The Three Phases in Detail

Phase 1 — Preparation (3 to 9 months)

• Inventory of all rights: approval, permission, land register, easements
• Update hydrogeology and injection data
• Comprehensive water quality analysis in accordance with applicable regulations
• Prepare financial key figures, EBITDA bridge, normalization
• Structural decision: asset deal or share deal
• Tax optimization — holding structure, review of lock-up periods
• Set up data room, prepare information memorandum

Phase 2 — Marketing (3 to 6 months)

• Long list of 30–80 potential buyers from the off-market network
• Anonym contact, NDA, send IM
• Collect indicative offers, form short list
• Management presentations and site visits
• Due diligence in the virtual data room

Phase 3 — Execution (2 to 4 months)

]]> https://lukinski.com/real-estate-stock-corporation-reit-ag-real-estate-management-stock-exchange-listing/ Tue, 09 Mar 2021 07:25:43 +0000 https://lukinski.de/real-estate-stock-corporation-reit-ag-real-estate-management-stock-exchange-listing/ Real estate stock corporation / REIT-AG – You don’t find the idea of a stock corporation bad at all and are now wondering how you can combine your capital company with the real estate industry? A real estate company is a company that serves the financing, development, realization, leasing, or marketing of real estate – starting with a single property up to a real estate portfolio in the three or multi-digit range. The management of real estate property or third-party real estate on behalf of third parties can also be handled by a real estate company. Here you can find all legal forms and here you can go back to the overview AG.

Immobilien AG: activities, stock exchange, conditions & advantages

A real estate stock corporation – or real estate AG for short – is a real estate company that has the legal form of a regular stock corporation (AG) and whose core business is primarily focused on the real estate sector. The company’s assets are thus used primarily – or exclusively – for real estate investments, or they consist of the construction of real estate and the subsequent sale of the same.

The largest German listed companies for residential real estate (as of 31.12.2o19):

• Vonovia
• German Housing
• LEG
• DAY
• Grand City Properties
• Adler Real Estate
• GAG

Business Activities Real Estate AG – Construction, Trading, Management & Co.

The range of activities of real estate stock corporations focuses, for example, on project development and the construction of real estate. The management and sale of real estate are also not uncommon focal points of this type of company. All in all, public limited companies can be involved in real estate trading, the brokerage of real estate as well as the holding and management of their own portfolios or offer corresponding services for non-corporate investment portfolios. Real estate stock corporations are a particularly popular choice for leasing.

Possible activities at a glance:

• Project development
  • Building
• Real Estate Trading
  • Acquisition
  • Distribution
• Real estate management
  • Hold
  • Farm
  • Rent
• Third-party services
  • Brokerage of real estate not owned by the company



Real estate company on the stock exchange – legal requirements & advantages

Real estate stock corporations can choose whether or not they want to be listed on the stock exchange. If you are a shareholder of a real estate stock corporation and decide to list your company on the stock exchange, you are subject to the German Real Estate Investment Trust Act (REIT Act). The REIT Act specifies which general regulations apply to your company and which qualifications your company must have in order to be admitted as a REIT stock corporation, as well as which tax regulations must be taken into account.

Many family businesses wishing to operate in the real estate sector as a public limited company (AG) deliberately decide against such a stock exchange listing, as the shareholders of their company are to be restricted to their own family circle of contacts and no share trading in public is envisaged.

Exchange-traded real estate stock corporation / REIT-AG

The REIT corporation is originally based on a US corporate form, namely the “Real Estate Investment Trust” – REIT for short – which gave the listed real estate corporation its name. Since its beginnings, the trust has experienced a considerable upswing. Little known in 1960, the corporate legal form slowly but steadily conquered the world in the 1990s and gained international renown. With the enactment of the REIT Act in 2007, the legal form of the REIT-AG was also introduced in Germany.

To make it easier to distinguish between them, German REITs are also often referred to as G-REITs, with the “G” standing for “Germany”. Sometimes REITs are also incorrectly translated as real estate funds in this country – however, there are some legal and economic peculiarities compared to the German legal form of the real estate fund.

Legal requirements according to REITG – stock exchange listing, quota & Co

In order for real estate stock corporations to be recognized as REIT corporations and to enjoy the corresponding advantages and benefits, they must meet a number of requirements defined in the German Real Estate Stock Corporations with Listed Shares Act (REITG). One of these rules requires that the real estate stock corporation be mandatorily listed on the stock exchange. Other restrictions relate to the company’s permitted free float – i.e. all company shares distributed among several, smaller investors – as well as the participation by shareholders together with per capita distribution of the shares. Other conditions regulate the equity capital, the fixed assets and also the turnover generated by the management of real estate.

Legal requirements for a REIT-AG:

• Headquarters & Management within Germany
• Listing on the market obligatory
• Free float at the time of listing: at least 25%.
• Free float after listing: at least 15%.
• Equity ratio: at least 45
• Real estate investments (immovable assets): at least 75%.
• Income from real estate: at least 75
• REIT participation per shareholder: max. 10%.
• Distribution ratio (net profit): at least 90%.



Small tip: For real estate stock corporations shortly before listing, a time window of two years is granted in order to fulfil all necessary requirements. Until all requirements under the REITG have been fulfilled, such a company is considered a pre-REIT.

Advantages for REIT stock corporations – tax exemption, competitive advantage & Co.

Real estate stock corporations with a stock exchange listing are particularly popular for financiers and large investors, as they are exempt from both corporation tax and trade tax, provided they meet the legal requirements in accordance with the REITG. As real estate is a particularly safe investment opportunity, it offers the chance to cushion inflationary fluctuations and risks. Furthermore, the purchase and sale of shares is simple thanks to market access, and transfers of ownership can be carried out quickly and flexibly.

Access to the capital market enables a real estate stock corporation to skilfully generate equity capital, which can then finance the investment in real estate. As a result, real estate stock corporations have a clear advantage in terms of the speed of growth of their equity, which means greater competitiveness in the market as a whole. Other legal forms of companies, on the other hand, are dependent on retaining their profits – that is, leaving the profits in the company instead of distributing them and accumulating them there – in order to increase their company’s equity capital or have no legal claim to a distribution of profits. The legal form also offers a considerable degree of security, as the equity capital accounts for just under half of the stock corporation’s total capital.

Advantages for listed real estate companies:

• No corporate income tax
• No trade tax
• Secure investment through tangible assets (real estate)
• Chance to offset inflation
• Quick & easy purchase/sale of shares
• Flexible share transfer
• Simple equity procurement
• Competitive advantage due to high growth rate
• High security due to equity ratio

Advantages for investors – Stable cash flow, growth & 90 % dividend

Another plus: the REIT corporation also offers a lucrative business for investors. Public limited companies are generally established for the long term, which means that the company can offer investors the prospect of a stable cash flow and long-term growth without exposing them to increased risk. The dividend payout is also very attractive for shareholders, with a statutory minimum requirement of 90 percent of the net profit for the year under commercial law.

Advantages for real estate AG investors:

• Stable cash flow
• Long-term corporate growth
• Low risk
• Attractive dividend payout

However, the application of the half-income method is not possible for shareholders with regard to the distribution of profits. Their profits must be fully taxed.

Real estate stock corporation / REIT-AG – For whom is it worthwhile?

Are you thinking about founding a real estate company or investing in an existing real estate company? For construction companies and development companies, this is often a lucrative venture, but also as a financier or shareholder of a real estate holding company, the formation of a real estate corporation can be quite worthwhile. Furthermore, the economic occurrence of real estate stock corporations extends to housing associations, property management companies and large brokerage firms.

Ownership of the real estate portfolio may be held either by the real estate company itself as a direct investment or by another real estate company whose shares are acquired by the real estate company by means of a participation. A mixture of direct investments and third-party investments is often used to acquire, hold or sell real estate. Due to the wide range of residential and commercial properties, the stock exchange listing is an attractive model for real estate companies.

AG: foundation, legal form, real estate shares (list)

1. Stock corporation (AG)
2. Real estate shares: List of companies
3. Real estate company
4. Alternatives to the REIT: Legal forms in Germany

Stock corporation (AG): Formation, liability, legal form & Co.

Aktiengesellschaft (AG) – The stock corporation is a German legal form founded by at least one person and organized by different bodies. Instead of a managing director, the company is managed by a board of directors consisting of at least one person. As the name already indicates, this legal form of a company primarily stands for stock trading. You would like to start a company alone or together with other people and learn more about company law forms in advance? Then you’ve come to the right place!

• Stock corporation (AG)



Real estate shares: List of companies

Real Estate Shares – Not everyone can afford real estate as a capital investment. Through real estate shares, however, everyone can participate in the real estate market and invest money. The share prices of the big players are rising year after year. Vonovia, Deutsche Wohnen, Dream Global, CBRE and Patrizia are a few of the best known active companies in Germany. In addition, there are more than 25 other companies. We have an overview of the most popular real estate stocks for you as an investor. But first a look at the risks of a stock, the stock market, for beginners and beginners. Now to the list and more on the real estate market, your investment options and all prices at a glance, here in the article on real estate stocks.

• Real Estate Stocks



Real Estate GmbH & Asset Management GmbH

Alternative – In this article you will learn the basics about real estate companies. Briefly explained, a real estate company is a company that has the purpose of leasing, developing, financing, realizing and/or marketing. It doesn’t matter if it is one or more properties. The management of residential and commercial real estate – in its own interest or as a service offered to third parties – is also a popular focus for real estate companies and asset management GmbHs. Find out more about the main advantages and disadvantages of buying real estate and the expected costs.

• Real estate company



Alternatives to the REIT: Legal forms in Germany

Legal forms – What types of company are there? If you want to start your first company, then choosing the ideal legal form is one of the first steps in the process of setting up a company. Whether it’s a special real estate company or a start-up, I’ve summarized all the types of companies in Germany for you here.

• Legal forms: List



Company types in detail:

• Sole proprietorship
• Registered businessman / registered businesswoman (e. K.)
• Civil law partnership (GbR)
• General partnership (OHG)
• Limited partnership (KG)
• Entrepreneurial company (UG)
• GmbH: Limited liability company
• Real estate GmbH / Asset management GmbH
• Stock corporation (AG)
• Societas Europaea (SE)
• Foundation / Family Foundation

 

]]>