Long-term entrepreneurial success is based on several factors. The sum of the right strategic decisions is crucial. But how do you make the right decision, especially at a time when a historic market phase is coming to an end and the market is picking up?
The Management Board members of MÄHREN AG Jakob Mähren (CEO), Simon Laube (CFO) and Dennis Rekittke (COO) provide answers.
Jakob, MÄHREN AG emerged from the beginnings of your own entrepreneurship. Was there a particular reason for founding the company at this particular time and taking entrepreneurial risks?
Yes, the timing of important strategic decisions is an important key to success. It’s not about what you would like to do, but about the market environment in which you find yourself and whether a planned step makes sense and is feasible.
When I decided to set up a company and later founded other companies, it was always the result of a thorough market analysis. Today, for example, I would make completely different decisions, as market conditions have changed completely in recent years.
Market conditions: They have changed significantly. We are experiencing a historic turning point. Real estate companies are surprised by the speed of the changes, some are currently having to go bankrupt, while the market is already picking up again significantly. What strategy is promising now?
When market conditions change rapidly, as we are currently experiencing, it is fundamentally important to be structurally well prepared. You must have created the conditions to be able to flexibly adapt the company’s business model, strategy and working methods and must not wait too long to make important decisions. In such situations, it is more important than ever to act quickly!
In this specific example, we have recently been able to significantly increase our equity ratio in order to be able to react quickly to the changed situation in the future. Shortly beforehand, however, we had originally decided on a different strategy.
The key is to recognize the right time to adjust the strategy. When the market picks up noticeably, as it is currently the case, speed is an important success factor. That’s why we are making targeted purchases right now!
What is your personal advice as a successful CEO?
Two things: get advice and develop a feel for your business! I firmly believe that you have to set up all company structures optimally and make decisions analytically. However, I am also fundamentally open-minded, constantly question things and like to seek advice, even before making important decisions. I am constantly talking to representatives of the real estate industry and experts from completely different sectors. A good network is worth its weight in gold.
This approach and my increasing professional experience give me the freedom to rely on my own instincts as well as all the analytical principles. And that of my team.
Jakob Mähren, CEO
„Flexibilität und Entscheidungsstärke sind maßgeblich.“
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Simon, interest rates are currently on the move again. What developments do you expect in the coming period?
The zero interest rate phase of the last decade was an unprecedented situation. We have now returned to a new normal and already passed the peak in interest rates. The EZB has already embarked on a new course with the two interest rate cuts in June 2024 and in September. Just like the US Federal Reserve, which also announced interest rate cuts in September.
At the peak, we had interest rates of around 4.3 % for 10-year real estate financing. Today, 10-year financing can be concluded at around 3.3 % again.
Further interest rate cuts have been promised by the central banks and are already largely priced into the current market interest rate.
The latest developments in the financial sector are of historic proportions. Interest rate trends, inflation, volatile stock markets: everything is on the move. What is needed to protect companies financially from the consequences of such changes?
You have to be much more professional than in the past and follow current developments very closely. Unexpected events such as pandemics or wars have made it clear that even the best strategy can suddenly become completely useless. This has once again made it clear how important it is to always have the necessary liquidity reserves in order to be able to act flexibly in such situations.
Numerous real estate companies are currently in difficulties. For new and existing variable financing, interest rates and therefore the debt service are rising significantly. This leads to lower surpluses or even negative cash flows and thus to lower loan-to-value ratios.
The daily study of developments in the financial sector is a prerequisite for success. You have to have your ear to the ground and interpret the changes in relation to your own business model in order to be able to make sound decisions. The demands on the finance department in companies have risen sharply. We are currently seeing many changes – both regionally and globally – and staying up to date is the basic prerequisite for future success.
We will therefore continue to monitor the market closely and take action when interesting opportunities arise. Those who act prudently now and avoid the obvious risks can strengthen their own position in the long term.
What role do the banks play in the current market phase?
The real estate industry needs banks. Without external financing, most projects – whether existing or project developments – would not pay off. Appropriate communication on the part of companies is crucial. After all, banks have to make good use of their funds – and want to obtain comprehensive information about borrowers.
Transparent communication with the financing banks is therefore essential for success in the real estate industry, especially in turbulent times.
For example, we have built up close business relationships with various banks over the past 20 years and have maintained them ever since. This gives us the scope to take advantage of opportunities in both good and bad times and to achieve stable growth.
We not only talk openly about current projects, but also about our other business activities. And we know that: The more complex the project and the overall structure, the more questions there are – and we have the answers.
We disclose all relevant information – in addition to the traditional property-related documents, we also provide information on the development of assets and the overall portfolio. This allows banks to understand how safe their money is with us.
In recent years, we have built up a comprehensive data management and reporting system. This means that we have all information and documents available regularly and (partially) automatically without a great deal of effort.
We seek discussions as early as possible, especially when refinancing and prolonging financing. This is because banks need more time to check everything thoroughly, especially in such market phases – eight to ten weeks is normal at the moment, but depending on the nature of the project, it can take longer. We are aware of this and plan accordingly.
„The current interest rate cuts are one of the key factors behind the current market upturn. That's why now is exactly the right time to invest in real estate.“
Simon Laube, CFO
„Unsere momentane Strategie: Ruhe bewahren, aufmerksam bleiben und bereit sein, flexibel zu reagieren.“
Simon Laube, CFO
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Dennis, how do you keep an expanding company on course when it has to navigate through rough seas?
The basic prerequisite: you have to be prepared for the storm. We are currently seeing that market events can change really quickly, and if you can’t adapt your internal work processes in the shortest possible time, you run the risk of disaster. For this reason, we have been focusing on the consistent digitalization of our processes for years. This enables us to adapt strategies and make the right decisions.
Unexpected changes can only be managed with a well-coordinated and committed team. You need trust and a move away from internal silo thinking. If you don’t pull together when the sea is calm, the problems will multiply when the storm hits.
The management board and teams need the same philosophy and work ethic, then upheavals can even lead to positive results. In any case, surprising challenges must be solved flexibly. I firmly believe that short decision-making paths and strong decision-makers help.
Last but not least, it is absolutely essential to be prepared for all regulatory changes. The requirements here are constantly increasing. Only those who have a clear view of the complex regulations in times of change will weather the storm and be successful in the long term.
How important is the topic of energy efficiency for you?
The demand for energy efficiency is increasing. For this reason, we are increasingly looking at the energy class when purchasing new properties and planning how we can improve this with targeted measures.
It is important to build up extensive know-how at an early stage, to be familiar with regulations and to keep a close eye on the issue of subsidies. For this reason, we have expanded our asset management team in this area.
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