Focus on Germany Focus on Germany

Identify country-specific cultural and business information

Identify country-specific cultural and business information

Recognize key elements of a

German transaction

Recognize key elements of a

German transaction

Discuss cultivating

relationships

Discuss cultivating

relationships

Networking/Relationships

Who You Need to MeetWho You Need to Meet

• Potential clients

• Colleagues

• Owners and sellers

• Connections to the above

Where Do You Find Them?Where Do You Find Them?

Contacting ProspectsContacting Prospects

Build relationships so someone can introduce you

First LetterFirst Letter• Make initial contact by letter• Address to firm as a whole

• If possible, use German language• Appropriate titles/forms of address

Be Punctual!Be Punctual!

Business Entity

Business Set-upBusiness Set-up

Co-BrokeCo-Broke

Representation

Joint Venture

Non-EU Foreign BranchNon-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 mortgagesObtain loans from abroad

Bank accounts in local or foreign currencyMove unlimited dividends and interest into

and out of the countryExpatriate all capital and reinvested profits

Own an unlimited percentage of equityInvest 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

FinancingFinancing• Banks finance residential 1-3 years• Savings/mortgage banks 1-10 years• Building societies 12-14 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 projectsForeign brokers waste money

advertising in newspapersInternational property seminars and trade

meetings good for marketingOffer 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!Show me

the money!Repatriatio

nRepatriatio

n

Double TaxationDouble

TaxationExplain FIRPTAExplain FIRPTA

Capital Gains

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