Two of Germany’s top listed real estate companies have opted this month to tap the bond markets as a source of fresh finance, as an alternative to their more traditional route of raising capital through a scrip issue to existing shareholders.
Hamburg-based Alstria Office REIT said its issue of a five-year senior unsecured convertible bond was well oversubscribed and it had raised €79.4m through the placement. The issue was priced at a coupon of 2.75% and at a conversion premium of 15% above the reference share price of €8.76. The bonds, each with a denomination of €100,000, will be convertible into 7.89m ordinary shares of Alstria, or about 10% of outstanding equity.
The deal should be good for Alstria, whose overall financing costs are still about 3.9% and whose net loan-to-value ratio is 46.8%, as it will lower its overall cost of finance and help it raise its equity level. Shareholders were less than enthusiastic at the dilution of their stake and have been marketing the stock down since the issue. Bank of America Merrill Lynch and JP Morgan acted as joint bookrunners with UniCredit Bank as co-bookrunner.
Meanwhile, also tapping the bond markets for an alternative to bank debt or mezzanine loans is Frankfurt-based commercial property investor DIC Asset AG, which is issuing a new unsecured bond, tradable in Frankfurt from July 9th. The company’s second five-year corporate bond will have a volume of at least €100m and will be listed in the Prime Standard for corporate bonds on the Frankfurt stock exchange. The proceeds are “to refinance existing bank debt on the portfolio as well as for general corporate purposes”, its prospectus says.
The bond is being issued through a public offering in Germany, Luxembourg and Austria as well as through a private placement with select international investors. Joint bookrunners are Bankhaus Lampe KG and Baader Bank AG. It is paying a coupon of 5.75%, just slightly lower than the 5.85% payable on its earlier likewise €10m bond. CEO Ulrich Höller commented on the new issue: “The planned issue will help us to base our debt financing on an even broader basis and to expand our financial leeway. We’re taking advantage of the high degree of flexibility and the proven cost effectiveness of this financing instrument in line with our mid- and long-term corporate objectives.”
Höller said that the issuing of the bond will permit further optimisation of the DIC Asset’s financing conditions by reducing its bank debt on the portfolio and property level. On this level, the issue proceeds can be used as equity, and therefore serve as an attractive alternative to classic junior or mezzanine loans. That way, the overall debt level and the net debt equity ratio of the company remain unchanged.