BUWOG - Bauen und Wohnen Gesellschaft mbH
BUWOG general office
Listed Austrian real estate company Immofinanz has pulled the planned public listing of its residential property subsidiary Buwog, citing the uncertain market environment. The IPO was scheduled for November of this year, and Immofinanz has taken pains to stress that the launch was now being re-scheduled for 2014, rather than scrapped.
The postponement comes on the heels of the stumbling stock market listing of German residential giant Deutsche Annington, which only went ahead in a watered-down version after a last-minute aborted full launch earlier in July. The markets have also been further muddied by the difficulties experienced by fellow residential rival Gagfah AG in placing the share package sold by previous majority owner, the US private equity investor Fortress.
Talking to the press, Immofinanz CEO Eduard Zehetner said, “We don’t want to be selling into such an environment, and frankly we don’t expect any dramatic improvement for the rest of the year.”
Immofinanz had been targeting selling about half the stock in Buwog in the public flotation and raising abut €700m, contingent on the markets remaining favourable and concluding further residential acquisitions in Germany to ‘plump up the bird’ prior to a sale. CEO Zehetner stressed that the IPO was ever only one of several options open to the group, including a possible trade sale to a third party, or a clean internal spin-off.
In anticipation of a German sale, which investors would hopefully appreciate as the Buwog company would be unencumbered by the mixed-asset and mixed geographic provenance associated with the parent group itself, Buwog had itself acquired the residential subsidiary of insolvent Berlin developer CMI Chamartin and renamed itself as Buwog Meermann. The company has since been expanding rapidly in Berlin, particularly in the districts of Mitte and Treptow-Köpenick, and had announced its readiness to buy several more portfolios.
Zehetner recently explained where all the new stock would come from: “A whole raft of investors are now seeing prices again that they had last seen when buying in before the onset of the financial crisis. Many had bought with little or no equity, and are only still there thanks to the forbearance of their banks. They’re now more than happy to sell off their portfolios.”
As we reported in an earlier issue of REFIRE, Zehetner was also keen to develop further in Germany because of the keen difference in yields between Germany and Immofinanz’s home market of Austria. The company’s own balance sheet claimed yields of 4.8% in Austria, against 7.5% % in Germany, as it steadily sold off portfolios in the states of Carynthia and the alpine Vorarlberg.
Nonetheless, another factor possibly weighing on CEO Zehetner’s mind in the decision to postpone the IPO is the extent to which the remaining rump Immofinanz, which is listed in Vienna and Warsaw, might attract currently unwelcome scrutiny for its overdependence on commercial property in volatile markets like eastern Europe and Russia. These include well-let malls at premium rates in Moscow, as well as half-empty office towers in Budapest and several other shaky assets in Rumania and central Europe.
Zehetner took over at Immofinanz in 2008 after the share price had collapsed to the level of a penny stock under the regime of previous CEO Karl Petrikovics, currently battling a six-year jail sentence for corruption. The share price has since partly recovered, after a sanitation programme involving hefty write-downs on the company’s eastern European assets. However, investigations surrounding the role of ex-Austrian finance minister Karl-Heinz Grasser in an earlier residential privatisation deal mean that the slight whiff of sulphur still surrounding the company hasn’t entirely dissipated.