Düsseldorf-based LEG Immobilien, which was floated earlier this year on the stock exchange by previous owner Goldman Sachs, is wasting little time in implementing its new stated growth strategy, which should see it adding at least 10,000 further apartments to its holdings by the end of next year.
Earlier this month LEG signed on a deal to buy 2,200 apartments in its heartland region of North Rhine-Westphalia from a consortium of investors led by the Luxembourg-based fund BGP. The apartments are located in several cities including Dortmund, Essen, Bochum and Witten, and the portfolio currently generates an annual ‘net’ rent of about €6.1m, or effectively €4.74 per sqm (per month) – just marginally under the existing average rent in LEGs holdings - while the portfolio has an 8% vacancy rate (high).
Given the modest rent and high vacancy rate, LEG not surprisingly commented that it believed that cap ex measures would produce synergies, while “a significant increase in rental value can be achieved through moderate rent adjustments and a reduction in the current vacancy rate.” CEO Thomas Hegel added in a statement, “With the forecast contribution to FFO, the new portfolio exceeds our yield expectations”.
Hegel said the group was in advanced stages of due diligence on further portfolios and the company had sufficient liquidity to realise its acquisition targets. LEG was currently negotiating a new revolving loan to take even more advantage of emerging opportunities, he said. The scalable, integrated LEG platform was capable of adding a further 20,000 to 25,000 apartments with modest adaptations to the personnel and organisational structure, he said.
The seller of the apartments on this latest deal was an offshore structured fund of BGP Investment, which originally started out as a joint venture between the Australian listed groups Babcock & Brown and partner The GPT Group, when both were snapping up real estate assets throughout Europe in pre-crisis days, particularly in Germany, France, the Netherlands and Scandinavia. The asset managers of the portfolio, Switzerland-based Feondor Asset Management, acted as transaction manager for the consortium.
The new portfolio brings LEG’s total holdings up to 93,000 apartments, and (at least for the moment) gives it the mantle of Germany’s largest listed property company by market capitalisation. The company’s €1.34bn IPO at the end of January marked the end of an extremely lucrative holding period for owners the Whitehall Funds of Goldman Sachs and minority shareholder Perry Capital.