Focus on Germany

Identify country- specific cultural and business information Recognize key elements of a German transaction Discuss cultivating relationships

Networking/Relationships

Who You Need to Meet Potential clients Colleagues Owners and sellers Connections to the above

Where Do You Find Them?

Contacting Prospects Build relationships so someone can introduce you

First Letter Make initial contact by letter Address to firm as a whole If possible, use German language Appropriate titles/forms of address

Be Punctual!

Business Entity Business Set- up Co-Broke Representation Joint Venture

Non-EU Foreign Branch Obtain Permission Register in local court Chamber of Industry and Commerce

Foreign Investment Requirements Very few controls Report incoming and outgoing transactions Building or operating permit may be required No special license necessary

Foreign Investors May… Acquire shares, land or mortgages Obtain loans from abroad Bank accounts in local or foreign currency Move unlimited dividends and interest into and out of the country Expatriate all capital and reinvested profits Own an unlimited percentage of equity Invest an unlimited amount of capital

Elements of a Transaction

Brokerage Practices No licensing requirements Must register with –Credit-reporting agency –Commercial register Professional organizations have stringent membership requirements –Passing comprehensive exams University degrees in real estate are common

Available Real Estate Good product hard to find Sites for development limited Municipal decision process tougher

Leases and Subleases Rent paid monthly, in advance Commercial rents review 2-5 years Residential rents reviewed annually Rents tied to cost of living index

Planning, Zoning and Permits Land use controls exercised at state level State plans binding on local authorities

Taxes Tax system complicated on all levels On real estate ownership and transactions VAT lowered from 16% to 7% on Jan. 1, 2005

Roles and Expectations The Broker –Buyer pays commission –Must convert monies and measurements –Expected to know European history

Transaction Contract executed, closing takes place No waiting period Two documents and registration for transfer Title insurance relatively unknown

Financing Banks finance residential 1-3 years Savings/mortgage banks 1-10 years Building societies years Maximum duration 30 years Most loans have floating rate Loan-to-value limit is 80%

Support Personnel Notaries are essential –Impartial –Represent both parties Firms use standardized contracts Lawyers –If you maintain German physical presence –Used by corporations

Marketing and Selling Practices

General Information Wealth/real estate activity scattered Personal connections more helpful than segmented marketing Usually purchase with cash

Investors More return-oriented Buy on cash flow and cap rates Don’t use projections or IRR Vacancies must be at a minimum Tenant reliability important

Marketing Properties Investors and developers use real estate agents, architects and contractors to promote projects Foreign brokers waste money advertising in newspapers International property seminars and trade meetings good for marketing Offer management services for investors Germans like single-point-of-contact

Marketing Properties Broker must find attorney, accountants, appraiser Client interested in the property income View product from client’s point of view Germans surprised at low quality of American construction

Qualifying Show me the money! Repatriation Double Taxation Explain FIRPTA Capital Gains

Selling and Presenting Company –Stress founding date, if old –Extensive services –Experience Yourself –Academic degrees –Longevity in business

Actual Presentation Be thorough Be systematic Be careful with numbers/details

First Meeting Visitor provides interpreter Close door to show respect May end without discussing business

Negotiating and Closing Decision-making –Small to medium companies Usually responsibility of one person –Large corporations Consensus through executive committee Negotiation preparation –Review differences between the sides

Mistakes to Avoid Informality Haste to get to the point Discomfort with silence Too persistent and competitive Separating issues Expecting others to keep their word Being overly honest or naive

Preparation Guidelines Analyze your strengths and weaknesses Analyze the other side Know the culture Negotiations

During the Negotiation Be direct and factual Stress efficiency, performance, quality Avoid hard-sell approach, tricks, gimmicks Avoid surprises Oral agreements morally but not legally binding Written contract evidence of an agreement

Key Point Review Build a network Establish good personal relationships Learn about culture and business practices Understand client expectations Plan and prepare seriously for business