France's Covivio launches takeover bid for €1.2b German office landlord

French listed property giant Covivio has announced plans to launch a voluntary takeover offer for Godewind, a German listed office property landlord with a portfolio valued at €1.2 bn.

Covivio, a major office owner in France and Italy, is offering €6.40 in cash per Godewind share representing a 14.9% premium to the firm's last closing price of €5.57 or 18.5% to the last reported EPRA NAV of €5.40.

Paris-based Covivio has the full support of both the management board and the supervisory board of Godewind for the deal. It has also secured support from shareholders, Godewind's CEO Stavros Efremidis and supervisory board member Karl Ehlerding, for shares representing 35% of Godewind's share capital. The public tender offer will be running from March 25 to April 22. Godewind's management has committed to delist the company following the offer.

Godewind, which went public in 2018, is the owner of a €1.2 bn portfolio consisting of 10 assets or a total of 290,000 m2 in Frankfurt (40% of the portfolio), Düsseldorf (28%), Hamburg (24%) and Munich (8%).

Operating in Germany since 2005 with a local team of 570 people, Covivio has been historically active in the country in the residential and hotel sectors. It started investing in German offices in 2018, with a focus on Berlin. The deal would lift the company's German portfolio to €2.1 bn, including a €600 mln development pipeline.

'This is a natural step for us,' Covivio's CEO Christophe Kullmann said at an analyst presentation on Friday. 'It is a simple transaction and the size of the company is well in line with what we need. Covivio is continuing its European development and is now reaching an important step in its growth in Germany. As in France and Italy, Covivio intends to contribute to the design of the city of tomorrow and to offer high-performance, flexible and service-oriented spaces.'

Covivio plans to actively manage the Godewind assets thanks to its local asset management team, with a focus on reducing vacancy rate and increasing rents. The company said that it expects an investment yield of 4.7% from the deal after reducing the portfolio's current vacancy rate of 8% (immediate gross yield of 4.3%). The deal will be financed with a mix of equity and existing debt, the company added.

Strong results in 2019, but Berlin's rent freeze to have an impact from this year

Covivio on Thursday also announced strong full-year results including an increase of 4.4% in EPRA earnings per share and a 5.3% like-for-like value increase. The company has just received an upgrade from S&P after reducing its loan-to-value below 40% (currently at 38%). It is guiding an EPRA earning per share of €5.40 for 2020, up from €5.31 in 2019.

The German office acquisition comes as Covivio starts to feel the pinch of Berlin's brand-new rent freeze for housing, which comes into effect from this month for relettings and in November for current leases. Covivio's Berlin residential portfolio represents 9% of the group's total revenues and will lose up to €1.9 mln in revenues this year and as much as €6 mln in 2020, as a result of the new regulation.

Although the value of Covivio's Berlin residential portfolio has yet to see a decrease, it is expected to do so from this year and the company said that it is planning to sell more residential assets in the German capital this year as part of its €600 mln disposal programme.


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