Apollo steps in as major shareholder in Germany's DEMIRE
US investor Apollo Global Management is becoming a major shareholder in DEMIRE after agreeing to take part in a 10% capital increase to be carried out by the German commercial property landlord. The deal is designed to create a major new property platform at double the company's existing size.
DEMIRE Deutsche Mittelstand Real Estate AG currently owns a €1bn portfolio across Germany, and will issue over 5 million new shares to be fully subscribed by the Apollo European Principal Finance Fund III. The new shares will be issued at a price of €4.35, representing an 11.3% premium to the closing share price as of 26th February 2018.
Apollo currently holds 0.28% of DEMIRE and has separately agreed to acquire over 1 million shares. Following the capital increase, the US investor will also launch a public tender offer for DEMIRE under the same terms. The company will maintain its listing following the offer.
DEMIRE's largest shareholder is currently the Wecken family, which altogether holds a roughly 30% share and owns exchangeable bonds which allow to purchase a further 10.23%.
Apollo has signed a strategic partnership with the Wecken Group with the aim to develop DEMIRE into a major listed German commercial property platform, double its portfolio to over €2 bn and obtain an investment grade rating.
Strategic investor
'We are delighted to welcome Apollo as an experienced and strategic investor who jointly with our other core shareholder fully supports the DEMIRE 2.0 strategy and also actively supports the planned growth of the company,' said CEO Ralf Kind. 'The business model of DEMIRE offers high potential for value creation in the German commercial real estate market that we would like to exploit in the next months and years.'
DEMIRE said it intends to use the gross proceeds of the capital increase of €24 mln to finance new acquisitions in secondary locations.
Separately, Apollo will also launch a voluntary takeover offer to acquire all shares in DEMIRE's subsidiary Fair Value REIT (FVR). The offer, which is supported by parent group DEMIRE, will be linked to a potential de-listing of the FVR shares. The offer price will be the higher of the two following average prices, the weighted average price of the FVR shares over the past three months and over the past six months.
Following the takeover offer, Apollo intends to contribute the FVR shares into DEMIRE in exchange for shares.
Sebastian-Dominik Jais, a partner at Apollo responsible for real estate investments in the European Principal Finance funds, stated, "The investment by the Apollo Managed Funds is the result of a thorough review of the German real estate market, and we are excited about DEMIRE's strategy and positioning which we will help to support in partnership with Klaus Wecken and his family office."Klaus Wecken commented: "Wecken & Cie. started to invest into DEMIRE in 2015 and developed the investment in 2017 to a strategic level, identifying DEMIRE‘s huge value potential in the German commercial real estate market. We are proud to have Apollo as a strategic partner working together with us from now on. Through DEMIRE 2.0 the way is set for the next stage in the evolution of the company, and we believe Apollo has the capital and the right strategic and cultural fit to support DEMIRE as we will continue to diversify and expand the company."