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Unified Germany need 'patient' investors.

Unified Germany need |patient' investors

The question is not why to invest in a unified Germany, but where and when, Hans J. Spiller, North America director, Berlin Economic Development Corporation, told a recent meeting of the FIABCI-U.S.A. international real estate organization.

Spiller and fellow guest speaker Leopold B. Von Bredow, consul general, The Federal Republic of General, both made encouraging appeals to members at a luncheon program at the United Nations yet they cautioned that what was needed was "patient money."

The speakers said the unification will not happen over night, a recent positive development, however, was the moving of the seat of government from Bonn to Berlin. According to Lebredo, some reports say property values have increased seven times in Berlin since the move.

Spiller said investors should be aware that they will not be able to "breeze in and out." Things in Germany, he said, are done "methodical and slow." In East Germany, it is a question of capacity and a lack of planning knowledge, he said. But he assures "a solid, interesting, long-term investment."

They need help with housing, bridges, and infrastructure. And companies need consultants, lawyers, and CPAs, and others. Speeler urged participants, however, to take a German company as a local partner.

The "new Germans," the residents of what was formerly East Germany, are going through intense turmoil and change, the speakers said. They have lost their system of living that they worked at for 40 years -- about one and one-half generations, said Lebredo. They lost their political and economic systems, he said. They must learn to read a balance sheet and plan their own vacations.

Spiller said these people have not had the luxury of democracy. "My heart goes out to these people," he said. "We have different tribes but we are all Germans."

Fifty percent of the East Germans face unemployment, Spiller said, not because of laziness, but because their companies may be forced out of business. They don't know how to sell or market, he said. "Their systems, their companies, their factories were never faced with the world of tough western competition."

And Spiller said they were also never taught to compete within their companies.

Von Bredo said they are grateful to the Americans for their support, but not all allies have been supportive. There has been, he said, a lot of "catastrophic reporting" that gave worry to many and affected the value of German mark.

Von Bredo described the size of the "new country." There were, he said, 60 million people in the old Federal Republic and 16 million in East Germany. It is like uniting, he said, the state of Oregon with Ohio to create a state the size of Montana. Eastern Europe has a Gross National Product that was a 10th of the size of West German.

Why invest in East Germany? Von Bredo answered: "If you invest in Thailand, you get your return maybe the next quarter. In East Germany, you will get it in three or four years, but in Thailand you may get a political coup."

In spite of the job los, they expect there to be 1.7 million jobs created. Volkswagen, IBM, Opel are investing in Berlin who all have invested or are currently doing studies.

"We offer you all the possibilities," said Von Bredow. "We are welcoming U.S. investment and all other foreign investment. We believe in free trade and free exchange."

According to Spiller, West Berlin and East Berlin, as one unified city, are "both now together a rather attractive, large metropolitan and manufacturing area."

While there are currently 1 million claims for reinstitution of property ownership, Spiller said, any purchases of property will be protected by Trihund, the trust company set up for privatization. Trihund will also take the risk for pollution, an area they have no time, money or understanding to deal with now, Spiller said.

The area surrounding the wall, Spiller said, was until recently a security zone, so there is room for development there now. There is currently, he said, a 50-person committee planning the growth of the area, but their scheme is not yet complete. "We don't want to have a New York-type center," Spiller said. "We don't really know what we want. We know what we don't want."

There is currently 8 million square feet of office space being developed.

"Americans are considered very highly in West Germany, even more highly in the East," said Spiller.
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Author:Fitzgerald, Therese
Publication:Real Estate Weekly
Date:Jul 10, 1991
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