BayernLB issues record €700m bond for re-nationalisation of 6,000 units

Munich-based bank BayernLB issued the largest promissory note ever in the history of German real estate for the Berlin housing association Gewobag Wohnungsbau-AG, a €700m note (Schuldscheindarlehen) issued in partnership with LBBW Landesbank Baden-Württemberg. With an up to 40-year maturity, it is also the longest-dated such company bond ever issued by any company.

Gewobag’s strong standing as a municipal housing company, its socially-oriented business model, and its credit rating of A+ (Standard and Poors) or A1 (Moody’s), meant that the original €200m planned was so heavily oversubscribed (nearly eight times, by more than 100 investors) that the issue was expanded to €700m, said BayernLB. The buyers were primarily insurers, savings banks, asset managers and pension funds.

The note was issued in fixed and variable tranches in a wide range of maturities, ranging from 400 days to 40 years, although more than 72% of the order volume was concentrated on tranches from 12 years upwards. At the end, the average maturity was 22 years, a testament to the high level of investor confidence, said the bank.

Underlying the bond issue was the decision by the Berlin state-owned housing company Gewobag to spend just under €1bn in re-purchasing 6,000 former public housing apartments that had been privatized in 2004, and via a circuitous route were now being sold back by listed German investor Ado Properties, itself in the process of being largely taken over by another listed group Adler Immobilien (see story elsewhere in this issue).

Gewobag is paying €920m for the portfolio, which included 70 commercial premises, with the deal expected to close before year-end. Gewobag board member Markus Terboven described the deal as economically justified; the price being paid is about €2,600 per sqm, about 10% above book value. The acquisition brings the total of units held by Gewobag in Berlin to 68,000. 

The apartments being bought are in the adjoining neighbourhoods of Spandau and Reinickendorf, and were built between the 1960’s and 1990’s by the then city-owned housing company GSW as social housing. Berlin then sold the apartments in 2004 to private equity investors for €405m. 

In 2013 listed Deutsche Wohnen swallowed up the apartments as part of a takeover, only to subsequently sell them on to Ado Properties in 2015 for about €400m. Ado Properties is thought to have invested a further €30m in the properties, so is likely to have doubled its overall investment.