Berlin housing investor Ado Properties buys for further €260m

Listed pure-play Berlin residential investor Ado Properties boosted its Berlin holdings by nearly 1,600 units when it closed on several recent transactions on assets spread throughout the city, investing a total volume of €262.5m. The seller of a large part of the Berlin assets was Mähren Group.

Ado, which in July tapped the bond market for the first time with the issue of a €400m bond to fund acquisitions, said the properties include 1,467 residential units and 127 commercial units, providing an average aggregate yield of 3.5%. The deals are expected to close during the fourth quarter of 2017, and will bring Ado's Berlin housing holdings up to nearly 22,000 units.

According to Ado, the acquired portfolios are distributed across Berlin with about 25% in central locations, including Tiergarten, Neukölln and Wilmersdorf, and have residential in-place rents of between €4.20 per sqm/month to €7.90 per sqm/month, with a vacancy rate of 3.2%. Ado expects new letting rents of between €6.50 per sqm/month and €11.00 per sqm/month, reflecting a reversionary potential of up to 86% with an average of 42%. The total annual net cold rent from the portfolios at purchase amounts to €9.2m.

'The assets we have just bought in Berlin were a good add-on to our existing portfolio and offer good synergies with other assets we hold,’ Friedemann Weck, head of acquisitions at ADO Properties, told REFIRE. ‘It is the biggest deal we have done so far this year. Our goal is to acquire around 3,000 apartments a year and we have already exceeded that this year.’

Along with the acquired assets, Ado expects to take over €99.2m of loans with an average maturity of 8.4 years and an average interest rate of 1.9%. The remainder of the purchase price will be funded with existing liquidity.

‘We plan a capex injection to refurbish some of the apartments, which should enable us to double the rents in some instances,’ Weck said. ‘There is also some senior housing, although our plan is to convert it back to regular housing once the lease expires,’ he added.

The company's recent €400m bond issue was 2.25 times oversubscribed, reflecting instituional hunger for German and Berlin residential assets. CEO Rabin Savion said of the bond issue, "We see a continuous deal flow of new opportunities in line with our past experience, and are confident we can deploy this additional capital over the next six to 12 months into new accretive acquisitions."

Ado Properties has seen its share price rise strongly recently following its IPO in 2015 and has been recently hitting new highs of over €40.00 per share. The company is owned 38% by Israeli listed property investor ADO Group.

The share price surge probably has its roots in Tel Aviv, where a struggle for control of the Berlin company Ado Properties seems to have reached some sort of a stand-off, after weeks of negotiations. Israeli-listed ADO Group has been the subject of a power struggle between listed Shikun & Binui Holdings and private equity fund Apollo Global Management and the Dayan family, which are both major shareholders in the parent company the ADO Group.

According to Israeli business daily Globes, the new joint management agreement will see Shikun & Binui retaining control of the ADO board of directors, but the ADO Properties board of directors will be controlled jointly, with each of the parties appointing three directors (three more directors will be independent). The parties said they agreed to take measures to increase trading in ADO Properties' shares, either by selling shares held by the ADO Group or by issuing new shares.

Apollo Global Management and the Dayan family have been busily buying shares in ADO Group from institutional investors after Shikun & Binui tabled an offer to buy 10% of the ADO Group shares, with the result that Apollo and the Dayan family now hold 37% of ADO Group, while Shikun & Binui hold 40%. The new kingmaker could become veteran financier Jacob Luxenburg, who holds a potentially decisive 5.1% stake.