The investment company DERECO has identified the frequently experienced financing gap for commercial project development plans as an opportunity for its customers and intends to become active in this field with private equity. During the past 20 years, the consultation company from Cologne has specialised in investment and transaction guidance, asset management and the concept of individual participation products for wealthy private customers and semi-professional investors. Over the next four to seven years, DERECO will be financing various project developments, mostly in the form of joint ventures, with capital from associated family trusts from the Netherlands and Germany.

“In this respect, we foresee a great opportunity for developers as well as our investors, as we ourselves have extensive investment and project development experience and will only participate in projects with private capital of one to maximum two families,” said Tassu M. Degen, Managing Director of DERECO Cologne. Project developers often shy away from partnerships with large joint stock companies that only allow institutional funds to be invested via asset managers from the financial and asset administration sector. Long decision-making procedures and extensive reporting can restrict the necessity to act flexibly, which is why such sources of financing are frequently regarded by medium-sized project developers as being unfavourable.

With financing agreements of approx. 50 million euros, DERECO intends to identify suitable project developments and finance these on behalf of its customers. The aim is to invest the promised risk capital in various projects on a rolling basis over the next seven years, whereby up to 100 per cent of the equity capital required in individual projects can be provided. The private equity pool can bring five to 15 million euros into each project.

“In order to limit the risks for our investors, we will pay very great attention to the observance of the agreed investment criteria,” said David Noll, Senior Investment Manager of DERECO. The asset manager DERECO places great importance on partnerships with experienced project developers as well as on exclusive investments in office, trading and residential projects. Apart from securing locations, existing building regulations and a sustainable building cost and selling calculation, further conditions are also a pre-letting figure of approx. 35 per cent and the confirmation of outside capital from a bank.

On behalf of its investors, DERECO aims at a return on equity of approx. 20 per cent (internal rate of return/IRR) per year. Degen is confident that three to four participations can still be secured within the course of this year as a result of current negotiations with reputable developers in the business.