COVID-19 IMPACT ON REAL ESTATE - WEEKLY PWC EXPERT SESSION VIA WEBCAST 22. APRIL 2020, 10:00-11:00 AM - PWC BLOGS
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COVID-19
Impact on Real Estate
Weekly PwC Expert Session via WebCast
22. April 2020, 10:00-11:00 am
Topics:
• Real Estate scenarios - today: Markets.Assets.Players.
• COVID-19 as catalyst for ESG
• Regulatory Update
• Tax Update
• Q&A session
Registration via LINK: https://www.pwc-events.com/Covid-19-Impact-Real-Estate
Questions to the PwC experts via e-mail to: de_covid19_pwc_real_estate@pwc.com
Updates and further informationen on https://blogs.pwc.de/real-estate/
© 2020 PricewaterhouseCoopers GmbH Wirtschaftsprüfungsgesellschaft.
Alle Rechte vorbehalten. "PwC" bezeichnet in diesem Dokument die PricewaterhouseCoopers GmbH Wirtschaftsprüfungsgesellschaft, die eine Mitgliedsgesellschaft
der PricewaterhouseCoopers International Limited (PwCIL) ist. Jede der Mitgliedsgesellschaften der PwCIL ist eine rechtlich selbstständige Gesellschaft.
Susanne Eickermann-Riepe
Partner, PwC Real Estate Leader Germany
susanne.eickermann-riepe@pwc.com
Thorsten Schnieders
Partner, PwC Real Estate, Germany
thorsten.schnieders@pwc.com
Thomas Veith
Partner, PwC Real Estate Deals Leader Germany
thomas.veith@pwc.com
Christiane Conrads LL.M.
Head of German Real Estate Desk, London
c.conrads@pwc.com
Eva Handrick
Partner, PwC Real Estate Assurance, Germany
eva.handrick@pwc.com
Sven Behrends
Partner, PwC Real Assets, Germany
sven.behrends@pwc.com
PwC Real Estate | WebCast COVID-19 22. April 2020
PwC 2
Szenarios Real Estate
Deep Dive
Real Estate – Facts. Forecasts. Big picture.
The Deep Dive includes an initial assessment of the impact of the
COVID-19 crisis on the real estate industry. One thing is already
clear: There will not be a single scenario. Types of use, market
participants and segments as well as phases of the value chain are
affected differently:
• Capital markets
• Real estate markets
• Asset classes
• Real estate player
• Real estate value chain
In the market has also arrived: COVID-19 is a catalyst
• Structural changes or initiated transformations of the industry
are accelerated (e.g. ESG, digitalization) Susanne Eickermann-Riepe
• A new real estate cycle begins, long-term effects on the real Partner, PwC Real Estate Leader Germany
estate markets are becoming apparent susanne.eickermann-riepe@pwc.com
• The behavior of users will change and with it the way we deal
with real estate
PwC Real Estate | WebCast COVID-19 22. April 2020
PwC 3
Scenarios and impacts – from short term impact to long term
recession
Scenarios include V-, U- and L-shape, but neutral evaluation is also possible
Best Case (V Shape) Base Case (U Shape) Worst Case (L Shape) Neutral Case (N Shape)
False Alarm Measured Recovery Prolonged Event Non Event
Szenario
• Reduction of medium-term • Persistent recession: return • Continued recession poses • No or positive influence (at
growth to earlier GDP levels after a drastic threat to the least temporarily) on medium-
Impact
• Shift in investment and several quarters economy term growth
consumption (no reduction) • Impairment of performance • Return of total production • Almost no impairment of the
and growth (at least two years) to pre-Covid-19 level not overall production and use
• Shift/limitation of investments foreseeable • Unchanged level of
& consumption • Strong influence on investment and consumption
investment and consumption
PwC Real Estate | WebCast COVID-19 22. April 2020
PwC 4
Historical events and their
impact
Real Estate - Facts
Historical examples of the recovery of the real estate sector in the
wake of exogenous shocks and economic crises classified
according to the V-, U- and L-shape:
− V: 2015, Chattanooga, TN, VW Diesel Scandal
− U: 2003, Hongkong / Singapore, SARS Epidemic
− L: 2006, New Orleans, Hurricane Katrina
Thorsten Schnieders
What do we learn from these Partner, PwC Deals, Germany
thorsten.schnieders@pwc.com
scenarios?
PwC Real Estate | WebCast COVID-19 22. April 2020
PwC 5
Historical examples: Impacts on the real estate sector after
exogenous shocks
Best Case – V Shape Base Case – U Shape Worst Case – L Shape
False Alarm Measured Recovery Prolonged Event
2015, Chattanooga, 2003, Hongkong / Singapore 2005, New Orleans
VW Diesel scandal SARS Epidemic Hurricane Katrina
• VW emissions scandal leads to • Rents for retail and shop premises in the • Destruction of the housing stock in New
considerable price effects in the short term first half of 2003 fall by up to seven per cent Orleans by about 50 percent
on the Chattanooga property market or 18 % compared with the previous year • Only after three years does the housing
• The company's only production facility in • Decline in office rents in 2003 and strong stock recover migration movement
the United States bounce-back in 2004 • New Orleans is a smaller city today than it
• Prices drop by up to 15% in the immediate • Investment sentiment and activity is frozen was before Hurricane Katrina
surroundings of the factory during the SARS period significant • Significantly reduced demand for housing
• Recovery of real estate prices within a reduction in investment volume for followed by a worse price development
very short time 6 months compared to the rest of the USA
PwC Real Estate | WebCast COVID-19 22. April 2020
PwC 6
VW emissions scandal led to short-term distortions in the local
US real estate market, but quickly "back to normal"
V Shape
Background Economic impact Implications for Real Estate
• Volkswagen is the largest private employer in • Loss of reputation of the company worldwide • Reduction of transactions by about 30% and
Chattanooga, TN, USA • Volkswagen sales figures in the United States in short-term reduction of average real estate prices
• Including supplier companies, around 20,000 jobs Q4 2015 collapse by more than 12% year-on- by up to 15% depending on the distance to the
are dependent on the Volkswagen factory. year as a result of the scandal factory
• Sales stop of passenger cars with 2.0 and 3.0 • "Bounce-back effect" after about three months
• Exhaust emissions scandal takes off with
liter diesel engines in the USA
revelations by US environmental authorities
• As a result of the "diesel gate", there is great Price effect after weeks after announcement and
uncertainty regarding the future development of VW sales figures in the USA (2016 - 2019)
geographical distance from the factory
the company and thus jobs
500
• Despite the diesel scandal, VW continues to
operate the site and adheres to the expansion 400
plans
Price effect
300
200
100
0
2012 2013 2014 2015 2016 2017 2018 2019 Time
Distance
Absatzzahlen Fahrzeuge VW in den USA, in tsd
PwC Real Estate | WebCast COVID-19 22. April 2020
PwC 7
SARS epidemic in Hong Kong leads to 6-month dip - after
which real estate markets reach pre-crisis level
U Shape
Background Economic impact Implications for Real Estate
• In February 2003 the Severe Acute • Significant decline in GDP after the outbreak of • Stagnation of the investment market and
Respiratory Syndrome (SARS) breaks out in the epidemic reduction of transactions by up to 72%
Hong Kong • Return to pre-crisis level after two quarters • Residential real estate prices remain largely
• Probably originating in the Chinese province stable, only a reduction of 1-3%
of Guangdong • Return to normality after six months
• Include measures to control the disease: • Strong "bounce-back" of the office markets
– Quarantine measures to prevent chains
GDP Hongkong 2001- 2004 Transactions & Property Prices,
of infection
Hongkong 2001- 2004
– Closure of educational institutions for
about three weeks
– Closure of public facilities
– Large area disinfection
– Reduction of social contacts
– Duty to wear face masks
• Duration of the epidemic: approximately
four months
SARS Epidemie
SARS Epidemie
Source: Zillow Economic Research Source: Zillow Economic Research
PwC Real Estate | WebCast COVID-19 22. April 2020
PwC 8
Hurricane Katrina changes the New Orleans real estate market
forever
L Shape
Background Economic Impact Implications for Real Estate
• Hurricane Katrina hits the Gulf Coast of the • Reduction of the total population of New Orleans • Loss of approx. 50% of the building stock
United States at the end of August 2005 from about 460,000 to about 230,000 inhabitants • No transactions in the six weeks following the
• Category 5 storm causes storm surges and • Increase in unemployment from around 6% to up to storm
dam breaks in New Orleans 16% within one month after the hurricane • In the following years permanently worse property
• 80% of the city area will be flooded for price development compared to the rest of the
several weeks in the course of the storm Residential portfolio New Orleans, USA 2005-2011 United States
250000 0,6
• Most expensive natural disaster until the
Tohoku earthquake in 2011 200000
0,4
• Total amount of damage is approximately 0,2
USD 125 billion 150000
0
100000
-0,2
50000
-0,4
0 -0,6
2005 2006 2007 2008 2009 2010 2011
Housing Stock New Orleans YoY % Change
Source: US Census Bureau, 2015
PwC Real Estate | WebCast COVID-19 22. April 2020
PwC 9
Future topic: Climate change and the influence of physical
threats on the real estate markets
Future
2020 Real Estate is especially prone to physical and The Bank of England derived
Climate Change and transitional climate risks (e.g. flooding) future value changes caused
physical threats by climate risks
• Climate change is already
influencing real estate markets,
with properties exposed to sea Real Estate Value change from
level rise in the United States Assets physical risks
selling at a 7 percent discount to
Scenario A B C
those with less exposure.
• Market intelligence provider Four Global Average -15% -30%
Twenty Seven and real estate
technology company GeoPhy have
North America -15% -30%
partnered to assess the exposure Scenario Definitions:
to the physical impacts of climate
A - sudden transition to well below 2°C
change of 73,500 properties owned B - orderly transition to well below 2°C Europe -8% -15%
by 321 listed Real Estate C - 4°C increase in global temperature
Investment Trusts (REITs).
Asia Pacific -30% -60%
• 35 percent of REITs properties are
exposed to climate hazards.
Source: Four Twenty Seven, 2018 / https://www.globalpropertyguide.com/news-what-lessons-can-property-investors-
PwC Real Estate | WebCast COVID-19 22. April 2020
learn-from-the-last-economic-crisis-3891
PwC 10Markets. Assets. Players. - Challenging framework conditions Real Estate - Forecast. • Restrictions have a significant impact on economic activity. Europe is heading for a sharp recession, which will trigger significant policy responses. • The investment volume is expected to be rather weak in the second half of the year. Unless there is a rapid recovery, the volume of business will remain subdued in 2020. • The volatility of the financial markets is high. Real estate values tend to lag behind the movements on the broader stock markets. • Rents and NOI are expected to come under increasing pressure, while yields will rise as liquidity becomes Susanne Eickermann-Riepe tighter. In contrast to past cycles, low interest rates and Partner, PwC Real Estate Leader Germany a subdued supply side are supportive. susanne.eickermann-riepe@pwc.com PwC Real Estate | WebCast COVID-19 22. April 2020 PwC 11
The forecast is cautious – a U-shape scenario is likely Real Estate - Forecast. • Real estate values will develop differently in the asset classes. The main drivers will be the adjusted cash flows and the new risk assessment of the earnings generated. • Real estate segments such as hotels, restaurants and retail as well as the cyclical office markets will have to struggle. Logistics and housing will be the most resistant. • Experience with real estate cycles suggests that markets are recovering and holding assets over the cycle limits the prospect of direct losses from a downturn. PwC Real Estate | WebCast COVID-19 22. April 2020 PwC 12
AS OF MARCH 30th, 2020
The GDP impact in Germany is estimated at -5.8% to -9.3% for
Germany 2020
Scenario parametrization (extract GDP and unemployment)
Actual Base V-scenario (mild) U-scenario (severe) L-scenario (fatal) Comments
2019 2020 2021 2022 2020 2021 2022 2020 2021 2022 2020 2021 2022 • We continuously
monitor publications
GDP Growth and the respective
(%) - 0.9 1.6 1.6 -5.8 1.8 1.9 -7.2 0.2 1.1 -9.3 -0.6 -0.6
macroeconomic
estimates to extract
Unemployment
Germany Rate (%) 3.1 3.3 3.2 3.2 6.1 4.5 4.1 6.8 5.0 4.5 8.2 5.3 5.3 the ‘market view’
GDP Growth • Once we detect a
(%) - 1.3 1.7 1.6 -4.7 1.3 1.8 -6.3 0.0 2.1 -9.8 -0.2 0.0
significant
Unemployment deterioration of
Europe Rate (%) 7.6 7.4 7.1 6.8 13.6 10.1 8.8 15.3 11.0 9.6 18.4 11.7 11.2 estimates (based on
‘market view’), we will
GDP Growth revise scenarios and
(%) - 1.7 1.8 2.0 -4.2 1.5 1.8 -5.4 0.4 1.2 -6.7 0.1 0.1
adjust parameters
Unemployment accordingly
USA Rate (%) 3.7 4.1 4.0 4.2 4.9 4.4 4.3 12.3 11.1 8.9 16.4 15.6 14.8
Aggregated Sources:
Further Parameters available: Consumer Price Index, USD Exchange Rate, Long-Term Bond Yields, National Stock Index, Oil Price, Gold Price
PwC Real Estate | WebCast COVID-19 Source: Economist Intelligence Unit (Base scenario); Strategy& analysis 22. April 2020
PwC 13Markets. Assets. Players. Existing problems in the status quo, short-
term crisis effects and long-term effects as a yardstick for individual
scenarios
Pre-crisis COVID-19 crisis & short-term impact Post-crisis
Today
1 2 3
Status quo Actual effects Behavior impact
Where are real estate Which effects on real estate How will the crisis change
markets coming from? markets already be peoples behavior?
observed?
Historical lessons Crisis impact Crisis lessons Long-term change
What lessons have been Which further effects may How will governmental What is COVID-19’s longer-
learned from former events? COVID-19 has on real estate restrictions change? term impact on real estate
markets? markets?
PwC Real Estate | WebCast COVID-19 22. April 2020
PwC 14Behavior. Bytes. Bricks.
The effects of the crisis are not only driven by the markets, change in
behavior also plays a role
Markets. Assets. Players.
Real Estate Real Estate Real Estate Real Estate Urban Cities &
Less Sharing
Markets Value chain Players Asset classes Metropoles
Changes in social behavior, in the desired experience – Showstopper?
Digital Work & Online Nearshoring /
Social Distancing Health Protection Travel Restrictions Less Sharing
Home Office Conferences Focus on Local
PwC Real Estate | WebCast COVID-19 22. April 2020
PwC 15The COVID-19 crisis impact on Real Estate has to reflect some
industry changes and the market sentiment ….
Real Estate Real Estate Real Estate Real Estate Urban cities &
Markets Value chain Players Asset classes Metropoles
• Real Estate Markets are • The real estate industry • Investors review existing • Hard hits on hospitality • Sleeping cities
holding it´s breath seems to get partly worse portfolios and improve and leisure, restaurants,
their liquidity position bars and event locations • Social distancing is
• Europe’s commercial real • The value chain is partly as well as tourist driven freezing social life
estate finance market is in interrupted and effects will • Landlords and tenants are areas
disarray depend upon the duration in negotiations • Reduced economic
of the economic shutdown • Closed non food retail but activity leads to reduced
• Liquidity of debt capital • Brokers will suffer from booming food retail and social life
has been put into doubt as • Investment decisions are uncertainty drugstores
lenders pause postponed, Deal are on • No crowds, no gathering,
hold • Developers will have to • CoWorking and CoLiving no social life, no fun
• Europe´s Real estate wait for financing hit by infection fear
Capital market faces the • Reduced rental payments decisions or trying to • Fear for infection by using
prospect of a downturn are followed be reduced obtain permits • Logistics for e-commerce public transportation or
operating income doing well, x-boarder sharing offers
• Since 10 years it´s the first • Facility managers are logistics stand still
test of loans • Market activity will slow partly on hold and trying to
down mitigate health risks • Offices not used but paid
• Residential in a good
PwC Real Estate | WebCast COVID-19 shape 22. April 2020
PwC 16… but also the long-term behavior post-crisis can act like a
showstopper
Social Protect saftey Less travel or Digital work & Video- Nearshoring /
Less sharing
distancing and health gathering work for home conferencing local first
PwC Real Estate | WebCast COVID-19 22. April 2020
PwC 17Impact of the COVID-19 crisis on asset classes
Retail Retail Hospitality & Restaurants,
Office Logistics Residential
(Food) (Non-Food) Leisure Bars & Events
Short-term positiv U V / neutral U L V / neutral U
impact 2020
Long-term
impact 2022 & neutral L U neutral L neutral U
beyond
PwC Real Estate | WebCast COVID-19 22. April 2020
PwC 18Impact of the COVID-19 crisis on market players
(Financial) Architects & Asset-/ Fund Property Facility
Broker Valuers
Investors Engineers Managers Managers Managers
Short-term V U V neutral neutral neutral U
impact 2020
Long-term
impact 2022 & neutral L U neutral neutral neutral U
beyond
PwC Real Estate | WebCast COVID-19 22. April 2020
PwC 19Impact of the COVID-19 crisis on the real estate value chain
Project Portfolio Sale of Purchase of
Construction Renovation Maintenance
development Management property property
Short-term U V V neutral neutral V V
impact 2020
Long-term
impact 2022 & neutral neutral neutral neutral neutral neutral neutral
beyond
PwC Real Estate | WebCast COVID-19 22. April 2020
PwC 20Impacts with a view to the
future 2022 & beyond
Real Estate – Big Picture.
• Economic perspective - Japanese conditions, ongoing
recession, impact on performance and growth, high debt,
postponement/limitation of investment & consumption
• Capital Markets - Significant deterioration in financing options,
new risk assessments, rise in interest rates
• Real Estate Markets - Residential and Logistics as winners,
Commercial repositioned, reduced space requirements, shorter
rental periods, almost all European cities affected
• Digitization - data availability significantly increased, real
estate industry comprehensively digital, home office mix as
"new normal", tracking and identification procedures for health
& security
• Behavior - society has found its way back to "social life", but
Susanne Eickermann-Riepe
certain fears remain, desire to travel has returned cautiously,
Partner, PwC Real Estate Leader Germany
significantly less business travel, sharing with caution
susanne.eickermann-riepe@pwc.com
PwC Real Estate | WebCast COVID-19 22. April 2020
PwC 21COVID-19 as catalyst for ESG
Real Estate – Big Picture.
• Investors are in ESG mode, the crisis sharpens the view and
encourages additional questions
• Researchers are already monitoring the influence of S- and G-
factors in addition to the environmental goals and giving signals
for investment decisions
• Banks and insurance companies have already started using
ESG criteria for ratings Susanne Eickermann-Riepe
Partner, PwC Real Estate Leader Germany
• Impact on cost of capital becomes visible - every 3rd rating
susanne.eickermann-riepe@pwc.com
decision by Moody's was influenced by ESG issues in 2019 -
mostly negatively by downgrading the rating or the outlook and
with a direct impact on borrowing costs.. Thomas Veith
Partner, PwC Real Estate Deals Leader
• Exogenous shocks due to physical risks set new standards in thomas.veith@pwc.com
the assessment of investment decisions.
• Social and governance factors are transparent and also Christiane Conrads LL.M
established as a benchmark for investment evaluation Head of German Real Estate Desk, London
c.conrads@pwc.com
PwC Real Estate | WebCast COVID-19 22. April 2020
PwC 22ESG as a Game Changer
Changed market environment – ESG as a Game Changer ESG factors have a significant influence on the value
Investor Regulation Risk Stakeholder Higher Rents Lower Yields
Behavior Management Demand
• Institutional • Regulatory • Real estate has a • Tenants need • ESG integration • Lower yields for
investors demand framework: EU high ESG risk sustainable enables higher buildings
ESG criteria taxonomy, • Stranded asset buildings rental income Higher selling
• The demand from disclosure risks: • Key stakeholders • First movers prices
private investors requirements, etc. • Risks of transition (i.e. politicians, participate from • Lower financing
will follow later • Industry • Physical risks employees, etc.) USP in various costs Better
• Demand for ESG Standards & demand ESG sectors performance
• ESG
products and Certifications criteria
opportunities
services • National
regulations and
standards
PwC Real Estate | WebCast COVID-19 22. April 2020
PwC 23The definition of an ESG
strategy is necessary
Benefits of an ESG strategy
• Competitive advantage in real estate financing in a more
competitive market environment;
• Increased acceptance by employees, customers and society
in ESG-compliant crisis management (otherwise there is a risk of
loss of reputation); focus on
• Social responsibility and
• Solidarity;
• Increased resilience through life cycle analysis and the creation
of flexible, high-quality real estate solutions;
• ESG-compliant usage concepts (e.g. flexible office solutions,
high health and safety standards) are proving to be more resistant
to pandemics;
• Share price development on the capital market confirms
outperformance of ESG-compliant companies;
• Sustainable supply chains also in property management. Christiane Conrads LL.M
Head of German Real Estate Desk, London
Risk of a ESG strategy c.conrads@pwc.com
• prioritizing short-term economic considerations at the expense of
the environment and society.
PwC Real Estate | WebCast COVID-19 22. April 2020
PwC 24Strategies and recommendations for action – exploiting
opportunities in the current market environment
ESG Strategy Implementation and Monitoring
Targets Stakeholder involvement
• Increased transparency through reporting and information • Financier and equity partner
obligations • User
• Strengthening risk management processes • Service provider
• Quality improvement • Insurance
• Life cycle consideration as a business case (anticipation of ESG Due Diligence
ESG aspects in each investment phase) • Definition of ESG investment criteria
• Creation of gap analysis (ESG DD Report)
Fields of action in the • Derivation of concrete recommendations for action
operationalization Green Contracts
• Strategy • Investment management • Implementation of ESG criteria in all property-related contracts
• Organization & processes • Tools & IT systems (especially purchase, rental, management, financing and
• Regulation • Reporting insurance contracts)
• Standards • Legal & tax Adjustment of internal processes
• Risk management • Investment management
• Risk management and controlling
PwC Real Estate | WebCast COVID-19 • Reporting 22. April 2020
PwC 25Update regulation - deadline extension due to COVID-19 ESMA & BaFin Relief • In a public statement, the European Securities and Markets Authority (ESMA) has extended the deadlines for preparing semi-annual and annual reports for funds (AIF and UCITS). This applies to reporting periods ending between 31.12.2019 and 30.04.2020. • Annual reports that refer to an end of the reporting period that lies between 31.12.2019 and 31.03.2020 deadline is extended by two months compared to the previous deadline • Annual reports that refer to an end of the reporting period that lies after 01.04.2020 but before 01.05.2020: The deadline is extended by one month compared to the previous deadline • semi-annual reports of UCITS referring to an end of the reporting period which is between 31.01.2020 and 31.03.2020 Eva Handrick The deadline is extended by one month compared to the Partnerin, PwC Real Estate Assurance, Germany previous deadline eva.handrick@pwc.com PwC Real Estate | WebCast COVID-19 22. April 2020 PwC 26
Impact of COVID-19 on reporting by investment funds
Value-based facts through COVID-19 effects Consideration in reporting until 31.12.19
• In the opinion of the IDW, it can basically be • Focus on developments in the reporting period: Reporting on
assumed that the consequences of the coronavirus probable developments is generally not intended for investment funds
pandemic for the balance sheet or valuation are and investment companies
only to be taken into account in financial statements • Events such as COVID-19, which can have a significant impact on
with a reporting date after 31 December 2019. the investment fund, must be included in the reporting and information
on possible effects must be provided
• Clarification in the Annex that the effects of COVID-19 are not (yet)
ESMA IDW
publication: publications:
reflected in the values up to 31.12.19
• For investment companies: Risks threatening the existence of the
company and how they are dealt with must be reported in the
Actual information on our RE Blog: appendix to the financial statements
https://blogs.pwc.de/real-estate/ • If the auditor becomes aware of circumstances of very significant
importance before the report is delivered, the need to amend the
report may be discussed
PwC Real Estate | WebCast COVID-19 22. April 2020
PwC 27Immediate tax law measures
in practice
Reactions in Germany
• Immediate measures by the Federal Government and the
federal states: in particular deferral, adjustment of advance
payments, suspension of enforcement measures for taxpayers
who can be shown to be directly and significantly affected
• Good experience in practice, i.e. rapid implementation by the
tax authorities
• Technical transmission of applications by fax and e-mail
Federal states Sven Behrends
Federal measures
measures Partner, PwC Real Assets, Germany
sven.behrends@pwc.com
PwC Real Estate | WebCast COVID-19 22. April 2020
PwC 28Taxes - New announcements of the BMF in connection with COVID-19 FAQ "Corona" (taxes) of the BMF • Questions and answers on the tax relief granted by the BMF in connection with COVID-19 and with regard to external tax audits and wage tax deduction. • General information on how to deal with the questions that arise, whereby the decision in individual cases is subject to the tax offices, the local authorities or other contact persons. BMF letter of 9.4.2020 - Tax relief for grants and subsidies • Special payments to employees up to 1,500 euros are tax and social insurance free. • This covers special benefits which employees receive between 1.3.2020 and 31.12.2020 and which are paid in addition to the wages owed BMF letter of 9.4.2020 - Investment tax measures to consider the economic consequences of the COVID 19 pandemic BMF letter of 9.4.2020 - Tax measures to promote aid for people affected by the Corona crisis • Special regulations planned for “cross-border commuters” (Grenzgänger) - bilateral special regulations to avoid an unintentional change of the right of taxation through home office activities. PwC Real Estate | WebCast COVID-19 22. April 2020 PwC 29
Taxes - further relief vs. start of refinancing measures?
Supplementary budget of EUR 156 billion in Germany
Tax relief Possible refinancing measures
• Abolition of the solidarity surcharge retroactively • Capital levy (SPD; Left Party)
as of 1 January 2020 • Contribution of the real estate industry?
• Tax cuts, e.g. also income tax (Markus Söder) − Property tax increases
− Land transfer tax ("unconfirmed" rumour: new share deal
regulations, participation limit 75%, 10 years holding
period etc.)
PwC Real Estate | WebCast COVID-19 22. April 2020
PwC 30Your questions to the PwC
experts Susanne Eickermann-Riepe
Partner, PwC Real Estate Leader Germany
susanne.eickermann-riepe@pwc.com
Thorsten Schnieders
Partner, PwC Real Estate, Germany
thorsten.schnieders@pwc.com
Scenarios Thomas Veith
Partner, PwC Real Estate Deals Leader Germany
thomas.veith@pwc.com
.
Christiane Conrads LL.M.
ESG Head of German Real Estate Desk, London
c.conrads@pwc.com
Eva Handrick
Regulatory Update Partner, PwC Real Estate Assurance, Germany
eva.handrick@pwc.com
Sven Behrends
Partner, PwC Real Assets, Germany
Tax Update sven.behrends@pwc.com
PwC Real Estate | WebCast COVID-19 22. April 2020
PwC 31PwC information on COVID-19 and its impact on the real
estate industry can be found here:
Current information about Real Estate and also PwC Plus - All the information about real assets
COVID-19 with push message function
https://blogs.pwc.de/real-estate/ https://pwcplus.de/
Central email address for questions to PwC experts Weekly expert session via WebCast on current
on de_covid19_pwc_real_estate@pwc.com topics always Wednesday 10:00 to 11:00
PwC Real Estate | WebCast COVID-19 22. April 2020
PwC 32PwC COVID-19 Services
Operations Liquidity/Financing
• Management of the tenant and service • Monitoring the liquidity status
portfolio • Review of the loan portfolio
• Support in daily business • Support review grants and loan options
• Crisis Management • Dealing with tax deferrals
Scenario Analysis Strategic Impact
PwC E-Mail
• Development of scenarios for dealing • Expansion of IT systems & digitization
COVID-19 Expert Contact:
with the COVID-19 crisis • Further development of the value chain,
• Changes in the business model to business model & assets de_covid19_pwc_real_estate@pwc.com
ensure sustainable cash flows • ESG implementation
• Experienced, interdisciplinary team (Legal, Tax, Operations, Financials)
PwC COVID-19
• Pragmatic and efficient project approach
Real Estate
Taskforce • Possibility of short-term support and 'Ready-to-Go' support with a proven
IT communication platform
PwC Real Estate | WebCast COVID-19 22. April 2020
PwC 33https://www.pwc-events.com/Covid-19-Impact-Real-Estate
COVID-19
Impact on Real Estate
Weekly PwC Expert Session via WebCast
29. April 2020 von 10:00-11:00 am
Registration via Link or via E-Mail:
https:/www.pwc-events.com/Covid-19-Impact-Real-EstateClimate for REAL Change - ESG Impact on Value
Buildings need to adjust to their occupier needs and changing Buildings interact with tenants, staff and their environment
regulation – certification/rating is key
Dirk Hennig
Area Design and Building Building Occupier health Mobility Interaction with Social / governmental dirk.hennig@pwc.com
consumption Construction operations certification and safety concepts environment responsibility
• Development of • Sustainable • Integration of • Certification • Ensure well- • Broad access to • Interaction • Fair treatment of
brown fields design, materials renewable provided rating being of tenants public transport between building employees/contractors
instead of green and construction energies and allows for • High flexibility • Support of and surroundings during construction and
fields • Efficient building • Low level of comparison (e.g. co-working) various mobility (inclusion and operations
• Redevelopment (energy, water consumption and • Growing number and accessibility concepts (e.g. e- accessibility) • Good Governance
of existing and waste) small carbon of investors and for all persons mobility, bicycle) • Strengthen • Tax strategy
buildings • Protection against footprint tenants require • SMART building neighbourhoods • Fight money laundering Dirk Kadel
unique events certification and interactions dirk.kadel@pwc.com
Factors impacting marketability and value Factors impacting marketability and value
ESG compliance requested by tenants and stakeholders – Our services for YOU to master REAL change in value
action required to create increased value from ESG
Increase rental income and occupier satisfaction Assessing the status Measuring the impact Creating value through Thorsten Schnieders
• Certified buildings allows higher rental income of your real estate of ESG on your ESG compliance thorsten.schnieders@pwc.com
• Operating costs can be an offsetting factor (new technology, management) valuations
1 2 3
• Satisfied occupier as building serves them better
Decrease yields, capex requirements and rental loss
• Buildings compliant with ESG show lower yields (i.e. higher sales prices)
• Compliant buildings are designed for the long term and need less capex • Reviewing existing rating • Review existing real • Helping you to create
• ESG compliant buildings have a lower risk of vacancy and rental loss of your real estate assets estate valuations additional value for your
/ portfolio • Prepare valuations taking real estate assets Johannes von Richthofen
Create higher social acceptance • If no rating or certification carefully into account all • Cost optimization johannes.von.richthofen@pwc.com
• ESG compliant buildings fight climate change, reduce resource is in place: relevant ESG criteria: • Elevate existing ESG
consumption and have a lower carbon footprint • Quick-ESG rating - • Reflect all specifics in potentials
• Good governance, treatment of employee and interaction with its’ analysing key ESG valuation • Identify valuable ESG
surroundings provide social acceptance factors • Statement regarding measures
• If requested: advice you ESG compliance of
during certification your assets
How to assess, measure and create the optimal return
on ESG investments? Daiane Konrad
daiane.konrad@pwc.compwc.de © 2020 PricewaterhouseCoopers GmbH Wirtschaftsprüfungsgesellschaft. Alle Rechte vorbehalten. "PwC" bezeichnet in diesem Dokument die PricewaterhouseCoopers GmbH Wirtschaftsprüfungsgesellschaft, die eine Mitgliedsgesellschaft der PricewaterhouseCoopers International Limited (PwCIL) ist. Jede der Mitgliedsgesellschaften der PwCIL ist eine rechtlich selbstständige Gesellschaft.
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