Deutsche Real Estate Funds (DREF) has started the second phase of conversion work to create 500 modern student residential units in Berlin, Bremen and Stuttgart.
"Deutsche Real Estate Funds (DREF) has started the second phase of conversion work to create 500 modern student residential units in Berlin, Bremen and Stuttgart.
The existing properties in the three German cities were acquired by student housing investor DREF from the proceeds of the first student housing bond ever issued in Germany. The €44 mln bond was placed in June with German institutional investors. The bond proceeds are also funding the €5 mln cost of the modernisation work.
The conversion will transform 100 residential units in Stuttgart without a bathroom into 144 ensuite units for students. JLL has said the Stuttgart property will be worth €11.1 mln once the renovation is completed. The bond prospectus had estimated the value at €8.6 mln.
Lack of supply
Market data indicates that there are only 314,000 residential places available for Germany’s 2.7 million students. National student umbrella group Deutsche Studentenwerk has called for the creation of an additional 45,000 units.
DREF is one of the players working to create an institutional-grade student housing investment sector in Germany. One of the first steps centres on creating modern stock, complete with ensuite bathrooms.
Bremen and Berlin
The fund said it is using space previously unoccupied or which was earmarked for other facilities to realise the conversions. More than 300 ensuite units are being created at three student residences in Bremen and Berlin. DREF expects that the first students will be able to move into the modernised units 'as early as the coming winter term'.
'We’re delighted that our extensive modernisation measures and the selection of centrally located student residences in popular German university cities are reflected in the valuation. It also shows us that our assessment of the initial loan-to-value ratio was realistic to conservative,' said Felix Bauer, CEO of Deutsche Real Estate Funds Advisor (DREFA).
'Over the years student living requirements have changed significantly,' Bauer continued. 'Today most students, for example, wish to have their own bathroom. However, the majority can't afford such premises in a central location in many German university cities any more. For this reason there is a need for private investors who can become involved with the necessary capital and know-how.'
In July, DREF acquired a student residence in the northern German university city of Kiel with a market value of €20 mln. Conversion work will begin there before the end of 2015 to create 110 ensuite units from the original 84 apartments that are without their own bathrooms. DREF is also planning a new building with 150 units.
Overall, there are plans for 500 additional residential units in new buildings on the sites of the student residences held in the bond portfolio.
Watch Bauer and other experts talking to PropertyEU at the Student Housing Investment Briefing held at MIPIM in March 2015
Also see the October edition of PropertyEU for more on the latest developments in the student housing sector"