Resi specialist Velero plans capital increase and IPO by year-end

Berlin-based Velero Immobilien AG, a property management service provider in the German residential real estate market, said last week it is planning its IPO on the regulated market (Prime Standard) of the Frankfurt Stock Exchange before the end of the year. It plans to conduct a private placement exclusively for institutional investors by issuing new shares from a capital increase prior to the listing.

The company said it would use the net proceeds from its offering to transform into an independent real estate platform through the acquisition of three property portfolios it has earmarked, and by completing on its accretive acquisition pipeline.

The three portfolios comprise a total of 10,189 residential units mainly located in mid-sized cities in North-Rhine Westphalia and eastern Germany which have been managed by Velero and its affiliates since 2016.

According to the firm, the portfolio carries substantial upside potential which Velero plans to unlock with “hands-on asset management and the envisaged execution of an extensive investment plan”.

The company also suggested it would benefit from a positive political and macroeconomic environment for real estate in Germany. Velero’s said that its value-add approach provided room for relative outperformance and would be supported by favourable market fundamentals, especially in B-locations.

The identified portfolios combine more than 680,000 sqm of space and are currently generating an average rent of €5.01 per sqm, implying a gross yield of 5.0%, Velero said. They comprise flats ranging from 45 sqm to 90 sqm. The average rent of all three portfolios is below the current market level, offering good upside potential, the company said.

Sascha Giest, Co-CEO and chief financial officer of Velero said: “We believe that German residential real estate markets in mid-sized cities will show further dynamic growth in the future. Particularly, during the months of the Covid-19-crisis, these markets proved to be relatively resilient.

'Moreover, our properties provide affordable and quality living space to households in the low-to-mid income range. In our opinion, this part of the market is particularly resistant to adverse effects from a possible economic downturn, especially when compared to the higher end of the market. In addition, the size range of our apartments suits the trend towards smaller households well.'

Giest and his co-CEO Thomas Lange said they and other shareholders are committed to buying further shares in the course of the planned private placement, which will see Citigroup acting as sole global coordinator and joint bookrunner, with Kempen & Co, Société Générale and Commerzbank as additional joint bookrunners.