Co-founders Leonhard Sachsenhauser and Philipp Horsthemke explain how asset manager Coros takes an alternative view on the office market. Paul Strohm reports.
Canadian investor Ivanhoé Cambridge announced in January 2021 that it had acquired a 16,000 sq m mixed-use project which was underway in Berlin’s trendy Neukölln district, based on the conversion of an elegant former post office building dating from the early 1900s. Munich-headquartered Commodus was named as Ivanhoé Cambridge’s co-investor, asset and development manager in the deal. Commodus, since renamed Coros, was tasked with refurbishing and further developing the project, Alte Post Quartier.
Coros had, in fact, initiated and been working on the project for some time, having seen its potential as both a workplace that would appeal to the new generation of office workers and as a residence that would suit modern aspirations for living.
When Ivanhoé Cambridge bought the building out of Coros’s Fund I portfolio, the office area had been fully renovated, and a new residential component was under construction as well as a restaurant, a gym and storage facilities.
Ivanhoé Cambridge noted that the acquisition was in keeping with its mission to “revitalise neighbourhoods and create unifying spaces where occupants can live, work and play”.
Alte Post is symbolic for Coros too and is a project to which its co-founders Leonhard Sachsenhauser and Philipp Horsthemke refer, almost as a benchmark for the company’s future activities and as a reference point for a philosophy heavily influenced by the fact that it is a young company in which the average age of the staff is just 30.
“We are not in the business of creating the newest product,” says Sachsenhauser. “Some investors would probably have said you can never touch this building because it doesn’t offer you the right sizes of floor plates, it doesn’t offer you a typical workplace, because it has very dark areas in there. And, yes, we had to cut an atrium into it so that you could even think about renting it out.”
‘The question is always, what can you do at the same time and in the quality we want to do it, and similar to the things we did in Germany?’
Leonhard Sachsenhauser, Coros
“For us, it was of great importance to keep a historic building like this accessible for the public,” Horsthemke adds. “The beauty in the buildings’ ‘bones’ was always there, but it was evident that it needed some heavier lifting than usual – a thing investors sometimes shy away from.”
“We really risked something, obviously, in investing in such a structure. But we realised that this special structure is particularly appealing to tenants who are not searching for very boring office space that simply meets efficiency criteria.
“Now, it’s more about creating a special place, a communicative place, a place where people really like to be and to work and to meet people. And I think the Post is the best example of a place where people would like to work in the future.”
The philosophy has paid off during and after the pandemic. “Demand did change. But it’s not like we have to rethink everything,” says Horsthemke. “We were always thinking beyond classic office structure where you have a desk and you have your laptop, and you have your mediocre coffee machine, and everything was from Monday to Friday, from nine to five. That was never the world we lived in, and never the world we experienced in Berlin. We always had a very flexible approach to the workplace.”
As unconventional as the company is, Sachsenhauser and Horsthemke emphasise that location is key. “Picking the right location is still paramount to all investment in an urban environment, to see your building as part of the whole micro environment,” Sachsenhauser says.
The 16,000 sq m-plus 212 Gustav Heinemann Ring is Coros’s first property in Munich. Built in 1900, it was modernised extensively in 2020/21 (Image: Burkhard Franke)
“We are not the biggest believers in suburbia,” Horsthemke adds. “Central places in cities that are well connected and offer a great infrastructure around amenities etc are attractive,” he says.
“We’re looking at markets like Berlin and Munich where we can be really tenant-centric and create value through them, and not markets like Frankfurt where tenants are basically moving every five years to the latest high rise and where you always have to create new space which creates new emissions.”
Berlin a priority
Coros has been active in Düsseldorf and Cologne and other cities, but its youthful focus places Berlin and Munich in Germany high on the list of targets and it has a number of assets there. Projects include Sonnenallee 223, also in the Neukölln area, where it acquired and refurbished a former factory and administrative building in 2017 which has become a focus for TMT companies.
In June this year Coros announced its first acquisition in Munich with the Gustav-Heinemann-Ring 212 office building – dubbed Gustav – located in the Neuperlach district. The property has around 16,000 sq m of office, restaurant, and medical practice space, most of it leased to BSH Hausgeräte and the Federal Employment Agency.
The asset was bought on behalf of the Coros Fund II and will be upgraded with ESG certification in mind. “With the first purchase in the Bavarian capital, we are further advancing our target market strategy of acquiring existing, commercially used buildings in urban locations in Munich, as well as also in other European metropolitan areas,” the company said in a statement at the time.
Coros has ventured beyond Germany, but almost experimentally. Last September it bought and leased back a 1950s-built office in the Montmartre district of Paris in a deal with the Magnum Photos agency.
This year it will start work on the development of 3,500 sq m Vizcaya 12 office building in Madrid’s Atocha area.
‘We were always thinking beyond classic office structure where you have a desk and you have your laptop, and you have your mediocre coffee machine, and everything was from Monday to Friday, from nine to five.’
Philipp Horsthemke, Coros
“We’re very strong, obviously, in Germany, we have now two small investments on balance sheet in France and Spain,” says Sachsenhauser. “We did that in order to learn about those markets, to enter those markets and to have a footprint. But we will also target London, Paris and Madrid with our new fund as well. The European strategy is very city focused, not country focused.”
“Over time, this will be a European-wide platform and the dominance of Germany will even itself out as our footprint grows in the other markets. The question is always, what can you do at the same time and in the quality we want to do it, and similar to the things we did in Germany?”
Might Coros look further afield? “Beyond three-to-five years looking across the pond would also be interesting, but I’m not saying this is now dedicated strategy,” Horsthemke explains.
Commercially focused mixed-use
Nor is the company focused entirely on offices. “We are looking at mixed-use, a place where people work but also where they can live and I suppose it was a mixture of both as there’s also development of new micro apartments as well on the side. There may also be some retail in these assets. But they’re commercially focused so we’re not buying apartment buildings in Berlin and trying to get the tenants out to make money,” Horsthemke adds.
Pure residential development, meanwhile, is undertaken under the auspices of a separate a platform called Bayerische Immobilien Kontor, a developer in Bavaria focused around Nuremberg.
Am Borsigturm, Berlin, close to Tegel Airport, was previously a business incubator with 7,000 sq m of space. The building will be modernised and reconfigured for larger lettings and the exterior restored
The central emphasis remains on workspace, however. “We’re not looking at buildings as potential plots to take something down and recreate. But we’re trying to make the best out of existing stock and see how we can bring it into the new age, the new work environment,” says Sachsenhauser.
The company s also aiming to structure more acquisitions like the Alte Post deal. “We are working with discretionary funds and institutional investors on some of these developments,” Horsthemke explains. “When they’re above the average size that the fund will target we also have some co-investors that we’re working with, but mainly those that are already invested with us in the fund.
“I think that’s our modus operandi. In the Alte Post case our investors wanted to exit, but we wanted to see that development through and finish what we started so we found a new JV partner, Ivanhoe Cambridge. I think that’s the kind of structure we want to do more of.”