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The U.S. Consulate General on the banks of the Alster in Hamburg The U.S. Consulate General on the banks of the Alster in Hamburg

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Sale of the US consulate Hamburg – much more than just a transaction

Cushman & Wakefield advised the US government in the sale of the "Little White House on the Alster" to DERAG. The listed landmark will be converted into a hotel, with a concept that takes the architecture and history into account.

Spending the night in the White House – that will soon be possible. Not in Washington, but in an absolute premium location on the Outer Alster in Hamburg-Rotherbaum. The former US consulate is a neoclassical eye-catcher on the banks of the lake, with its columned portal intentionally reminiscent of the great model in the USA. Now the US government, which we advised, has sold the "Little White House on the Alster". To DERAG, which will convert the listed landmark into a hotel - with a concept that takes the architecture and history into account.

A successful transaction that involves much more than negotiating, preparing and signing the contract. Above all, everything must be done in advance to create a reliable basis for negotiations and thus full transparency for both seller and buyer. What condition is the property in? Does it comply with current building regulations? Where are the opportunities, where are the challenges? Where and how can the purchase price be realistically optimised? And how much modernisation and investment is required overall? Our technical due diligence team clarified these and other questions in this context and thus created the basis for the sale.

Niklas Hensiek, Capital Markets, and Wolfgang Neupert, Head of Technical Due Diligence, provide an insight into the details of the transaction project and the effective interaction between sales and the technical aspects of the building analysis.

The current market situation is challenging — how did you deal with this in the sales process and what ultimately led to the successful conclusion?

Niklas Hensiek: When selling the US consulate, we focused on the broadest possible, Europe-wide market approach from the outset - with a focus on private equity and project developers, but across asset classes from hotel to residential and office investors. We also took a correspondingly open approach to the possible subsequent use, not specifying any guidelines or scenarios, but emphasizing the versatility of a unique property. And that is precisely why there was a market even in difficult times - albeit not as strong as in boom phases: unique opportunities with such a high degree of representation as the Little White House are not for sale every day.
Garden area at the former U.S. Consulate General in Hamburg Garden area at the former U.S. Consulate General in Hamburg
Wolfgang Neupert: In addition to the broad market approach, we - as well as the seller, the USA - were concerned with making the sales process fully transparent. Accordingly, we were involved in the project at a very early stage and then throughout. The main objective was to identify potential technical issues before the actual marketing process and, if necessary, to develop solutions or proactively take the findings from the technical vendor due diligence into account in the sales process. Ultimately, this avoided many discussions that would otherwise have taken place.
Niklas Hensiek: Yes, the early involvement of our technical due diligence colleagues was essential and definitely one of the success factors. Transparency is and was the be-all and end-all - we wanted to identify potential risks that we might have encountered during the sales process in advance and develop appropriate solutions. Incidentally, this applies to all transactions, but especially to listed buildings with a revitalization business case.

What challenges or potential risks and issues did the prospective buyers face?

Room with a grand chandelier at the former U.S. Consulate General in Hamburg Room with a grand chandelier at the former U.S. Consulate General in Hamburg
Wolfgang Neupert: Especially with older properties, there are always risks that you don't immediately see or know about before you remodel or revitalize it. The requirements for a listed building are always higher than for other properties, especially from a technical point of view. On the one hand, you have to reckon with higher maintenance costs. On the other hand, there is often much less room for maneuver for conversions. The necessary coordination of structural measures - in this specific case, it was also about the partially protected interiors - with the staff of the heritage authority is an additional challenge and requires a willingness to compromise on both sides. 
Niklas Hensiek: There is also the economic aspect in particular. With monuments of this size, it is definitely not always easy to reconcile the profitability of the asset on the one hand and the requirements of the heritage authority on the other. However, those who take on this challenge have the chance to create something unique that will never be repeated in this location.

What advantages did the cooperation between sales and accompanying services such as technical due diligence bring here — for you as well as for clients and buyers? 

Wolfgang Neupert: The regular, close and trusting dialogue between the TDD team, Capital Markets and our joint client has definitely accelerated the sales process and made it more effective. Any questions and problems that arose could be followed up and clarified directly.
Niklas Hensiek: Yes, that's the big advantage of having all the relevant services under one roof, and one that should definitely not be underestimated. The distances are short and coordination is uncomplicated. People know each other, pull together and work out solutions together - usually directly in one room. After all, it's all about achieving the best possible result for the customer.
Corridor with staircases and a grand chandelier at the former U.S. Consulate General in Hamburg Corridor with staircases and a grand chandelier at the former U.S. Consulate General in Hamburg
Wolfgang Neupert: By working together directly from the outset, we were also able to ensure a great deal of technical depth with regard to the building's circumstances and thus, as already mentioned, a high level of transparency and a quick response. Our findings from the technical due diligence were already incorporated into the sales documents. We were also involved in important calls and meetings during the actual sales process in order to be able to answer technical questions directly, in depth and competently. This saves lengthy clarification processes, in which relevant information can sometimes get lost.

What are the possibilities for upgrading historic buildings technically and sustainably?

Wolfgang Neupert: The scope for technical or energy upgrades is usually less for historic buildings than for "normal" ones. However, depending on the scope of the individual requirements for monument protection, there is of course still room for technical improvements. Insulation of the building envelope, for example, which is often not possible or only possible to a limited extent, can be compensated for by a more efficient and CO²-optimised method of heat generation. There are also options for upgrading windows and doors to improve energy efficiency in line with the requirements of the heritage authority. 
Niklas Hensiek: It is always worth taking on a historic building — especially the small White House on the Alster, whose location alone is extremely exposed. The interiors are also extremely prestigious, the layout is unique and there is even the option of adding a modern extension to the rear. We very much welcome the fact that the former US consulate will be used as a hotel. On the one hand, there is a corresponding demand in Hamburg as a hotel location. On the other hand, the public will then also be able to enjoy the historical flair and the architectural details worthy of protection.
Wolfgang Neupert
Wolfgang Neupert

Head of Technical Due Diligence
Berlin, Germany


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