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The extended sales process for BayernLB’s 32,000-unit southern German residential portfolio has been narrowed down still further following the withdrawal from bidding of two leading listed Austrian property companies, Conwert Immobilien AG and Immofinanz AG.
Both Austrian companies are committed to their expanding German residential exposure, but have pulled out of the GBW closed auction process for different reasons. BayernLB is being compelled by the EU to hive off its housing subsidiary in return for receiving state funds during the credit crisis.
The bidding is currently at above €2.5bn, say observers in Munich, with now two remaining bidders left – a consortium led by Augsburg-based Patrizia Immobilien AG and a consortium based around a group of Munich and Nuremberg municipalities. BayernLB are committed to raising as much as possible from the sale to pay off its obiligations to the state of Bavaria, and are pressing for an early sale while the going is still good – hopefully in the course of the second quarter - rather than waiting until the end of the year, which is the EU-imposed deadline. Bidders may continue their due diligence on the GBW books throughout March, and must then submit final, binding offers.
Earlier this month Immofinanz CEO Eduard Zehetner said his company had withdrawn its non-binding bid, partly because of the increasingly restrictive conditions emerging as part of the social charter incumbent on the potential buyer. Additionally, the new entity would be difficult to merge with Immofinanz’s own €2.5bn Buwog subsidiary, which is aiming at its own German listing, given that only 92% of the GBW company was being offered for sale – leaving a minority partner to complicate any future management of a new German residential listed platform. “In the given environment, the formation of a joint German-Austrian stock-market listed real estate concern is not possible within any time frame acceptable to us”, he said. “However, we are convinced that GBW is a successfully managed residential property company with an excellent portfolio in Bavaria.”
Conwert Immobilien pulled out shortly after Immofinanz. New board director for operations Stavros Efremidis told Austrian business paper Wirtschaftsblatt that it had primarily seen its role as that of key service provider at the heart of an investor consortium, in the same manner as Patrizia in its current GBW bid and previous (successful) bid for the LBBW portfolio in similar circumstances last year. Conwert still intends to deepen its involvement in German housing and has readied €200m for further acquisitions. It plans to free up capital for investment by selling assets from its Eco Business commercial property portfolio in Austria which it bought three years ago.
With currently 24,000 housing units on its books valued at €2.7bn, it plans to increase its holdings to 30,000, targeting yields on new acquisitions of about 8.5%, three times higher than yields currently available in Vienna, suggested Efrimidis. New director Efrimidis himself comes to conwert from municipal housing group KWG, in which conwert Immobilien bought a 60% stake for its 9,700 housing units.
Patrizia Immobilien can now probably be considered the bookie’s favourite (unfortunately German bookmakers show a shameful lack of interest in opening a book on this form of business speculation). The firm gained valuable experience in putting together the successful bidding consortium which bought the 24,000-unit housing portfolio from the Stuttgart-based Landesbank LBBW last year. In that deal, Patrizia Alternative Investors raised €600m from a diverse group of German insurers and pension funds, along with Swedish and Swiss pension funds and a small injection of its own equity capital to put the deal together, supplementing the deal with the same amount of borrowings, raised from LBBW itself.
The consortium of municipalities responsible for the other likely bid are probably the outsiders in the two-horse race, given the unwieldy nature of raising the required level of finance across municipal boundaries. Not impossible, but difficult given the political realities involved, REFIRE believes.