Deutsche Wohnen
Andreas Segal - Deutsche Wohnen AG
According to Andreas Segal, the deputy CEO and DFO of Buwog, “The convertible bond provides us with the financial leeway to strengthen our develop to hold strategy and will bring our business model onto a sustainable growth path.”
German-Austrian listed residential property investor Buwog AG placed a €300m five-year convertible bond earlier this month as part of its drive to diversify its sources of funding. The bond was seven times oversubscribed and was fully placed within an hour. The bond issue marks the first time a zero-coupon bond has been issued by a property company in the eurozone.
The bond, bearing no interest and set to mature in September 2021, was split into denominations of €100,000 each, Buwog said. It will be convertible into about 9.6 million Buwog shares, representing about 9.58% of the company’s outstanding share capital.
Buwog set a conversion premium at 35% above the reference share price, which was about €23.26 per share, meaning investors must either pay the premium to convert their holdings immediately, or they must wait for the real estate company’s shares to reach at least €31.40 per share.
Buwog said in a statement it will use the bond’s proceeds to grow its asset management operations and property development in Germany. Specifically, it will strengthen its develop-to-hold strategy, it said. Any proceeds left over will be used to refinance debt and to service its property holdings.
This develop-to-hold strategy is primarily its developments in Vienna (€1bn), Berlin (€1bn) and Hamburg (€500m), where the company is investing a total of €2.5bn in 8,100 new apartments, of which 2300 will be kept for renting, over the next 5-7 years. Buwog currently owns and manages 51,000 apartments in Germany and Austria.
According to Andreas Segal, the deputy CEO and DFO of Buwog, “The convertible bond provides us with the financial leeway to strengthen our develop to hold strategy and will bring our business model onto a sustainable growth path.” Segal arrived last year at Buwog, but has experience of issuing such convertible bonds from his time some years ago as CFO at Berlin housing company GSW, where REFIRE remembers sitting down with him to discuss an innovative bond issue the company had just completed.
Earlier the Vienna-listed Buwog had posted a very strong set of figures for the full year 2015/16, raising its net profit to €240m, up sharply from €41m last year. Operating profit rose by 8% to €170.3m, and EBIT increased by 30% to €349.1m. It is forecasting recuring FFO in this current financial year to reach €108m and €150m in two years time.
