At this year’s half-year mark, it was starting to look like the era of large transactions in the German residential investment market was over, writes Deals Editor Isobel Lee.
A slump in deals – with just €9.3 bn worth of residential property changing hands in the 12 months to June 2016, according to Savills – underlined the point. Past mergers that shaped the maturing sector’s landscape are limiting acquisition potential, with sub-segment specialisation dominating the outlook.
However, Vovovia's current takeover bid for Conwert and a raft of transactions in August suggest that there’s life in the asset class yet. 'On the residential real estate market approximately. €0.7 bn was invested in August 2016. In the same month last year, the transaction volume was at around €0.3 bn,' confirms Matti Schenk of Savills Germany. ‘In the past 12 months the average monthly transaction volume amounted to €0.9 bn. The transaction volume of the last 12 months totalled €10.4 bn, representing an increase of 4% compared to the August figure.'
Stand-out deal
One of the stand-out deals saw Benson Elliot purchase a 74.9% stake in GWB Elstertal Geraer Wohnungsbaugesellschaft (GWB) from its insolvent parent company, Stadtwerke Gera. Communal housing company GWB owns and manages around 6,700 residential units, encompassing 402,000 m2 across 330 assets, in Gera, the third-largest city in Germany’s Thuringia region. The remaining shares in GWB are owned by the City of Gera. Benson Elliot said it intended to refurbish and lease the company’s core residential properties, introducing new letting and operational management processes, while disposing of non-core assets. Frank Hirling has been hired to oversee the team that will implement the value-add strategy.
Just 10 days later, Peach Property Group, the Swiss-listed residential real estate investor, acquired 900 apartments in the southwestern German city of Kaiserslautern. The vendor was a large German property company and the price was not disclosed. The 63,400 m2 portfolio comprises 901 apartments, 10 commercial units and 589 parking spaces. Its acquisition increases the total lettable space in Peach Property Group’s investment portfolio by 34% to almost 250,000 m2 and raises the number of apartments by around 40% to 3,150 units.
Next up, Berlinovo sold the Pegasus care home portfolio to Deutsche Wohnen for €420 mln in a record transaction, the largest of its kind so far in Germany this year. The portfolio includes a total of 28 fully-let nursing homes comprising 180,000 m2 of rental space and 4,132 beds. The average contract term is 13 years and the current net annual rental income amounts to €27.3 mln. According to Berlinovo, the average vacancy is 15%.
Conwert deal steals headlines
'This portfolio is one of the largest transactions in the German market for nursing homes in recent years,' said Dirk Richolt, head of real estate finance at CBRE, who advised Berlinovo. 'For us as a transaction adviser this benchmark deal is anomolous for the asset class.' In the first half of 2016, about €863 mln of care homes was transacted in Germany.
Located all over the country, the majority of the properties are in Bavaria, Baden-Württemberg, Rheinland-Pfalz and Nordrhein-Westfalen. Most were built during the 90s and early 2000s and belonged to the 13 different fund companies of the former Berliner Immobilien Holding (BIH), today Berlinovo.
But in what looks likely to be the biggest residential trade of the year, Vonovia SE stole the headlines at the start of September with its takeover bid for Conwert for a rumoured €2.9 bn. Vonovia is offering all Conwert shareholders 74 Vonovia shares for every 149 Conwert shares, implying a price of €17.58 per Conwert share, based on the Vonovia closing price on 2 September.
The deal would allow Vonovia to expand its footprint in Leipzig, Berlin, Potsdam and Dresden, as well as Vienna. With around 340,000 residential units across Germany, Vonovia plans to integrate Conwert’s 24,500 residential units into its network, as well as gaining ground in Vienna, where it will maintain Conwert’s headquarters.
The Austrian property portfolios would still be managed by Conwert, which will remain listed on the Austrian stock exchange.
Vonovia needs simple majority
Last year, Conwert rejected a lower takeover bid from Deutsche Wohnen (€11.50 for a Conwert share), at which point Adler bought a 25% stake in the business, which it has already committed to tender.
PropertyEU understands that Conwert shareholders are likely to be granted a period from 18 November to 19 December to tender their shares. For the deal to complete, Vonovia needs to secure just a simple majority of Conwert’s shares.