BUWOG acquires northern Germany portfolio
German-Austrian BUWOG Group has acquired a residential and commercial real estate portfolio in northern Germany from several unnamed international institutional investors for an undisclosed sum.
The portfolio comprises 693 residential units, 32 commercial units and 386 parking spaces in Hannover, Bremen, Kiel, Lübeck and Lüneburg. The 34 properties have a combined space of 41,300 sqm. Most of them were built in the 1980s. The average rent is around €7.36 per sqm, with the vacancy rate standing at 6%.
‘All of the properties are located in cities with a positive population outlook and dynamic economic growth,’ said BUWOG’s COO, Herwig Teufelsdorfer. ‘As a result, the demand for the apartments we have acquired in the medium price segment has been sustainably secured. Through maintenance and modernisation, we will also enhance attractiveness and reduce vacancies to 2%,’ he added.
For Teufelsdorfer, the portfolio represented a rare chance to buy hundreds of units at once. ‘A few years ago, you could even buy several thousand units at once, which is not normally the case anymore,’ he told REFIRE. ‘This portfolio fits very well into our existing portfolio in Germany and the vacancy rate will enable us, over time, to increase the rental income.’
BUWOG describes Bremen, Hannover, Kiel, Lübeck and Lüneburg as ‘strategic investment locations’. The group currently holds around 49,000 units in Germany and Austria. PMM Partners advised BUWOG.
It has been a whirlwind few weeks for BUWOG. Just before Christmas, Germany’s largest residential property company, Vonovia, announced its intention to acquire it in a cash deal which valued BUWOG at €5.2b. The takeover will enable Vonovia to increase its housing stock from 350,000 to 400,000 units, giving it valuable access to new housing development.
Subsequently, DAX-listed Vonovia will become the market leader in Austria by a wide margin through the takeover, although about half of BUWOG's 50,000 housing units are in Germany, where they will be added to Vonovia's centralised operating platform for handling letting operations and upkeep. This reverses the company's original strategy of selling its small holdings in Austria, inherited as a result of the earlier takeover of listed Austrian residential specialist Conwert in February of this year.
The deal will help Vonovia intensify its construction activities, building on BUWOG’s extensive expertise in property development. The company will double its target of newly built apartments to 4,000 annually. Vonovia’s offer reflects a fair valuation of the business, BUWOG’s CEO Daniel Riedl told REFIRE last month. ‘Vonovia doesn’t have a development pipeline and we have a big development business – we have land in Berlin, Hamburg and Vienna upon which we can build 10,000 apartments. I think we are a perfect add-on for Vonovia.’
BUWOG has a number of sizeable projects in the pipeline. One of its most ambitious ones to date is ’52 Grad Nord’ in Grünau, in the southeast of Berlin. The project, which comprises 988 apartments, is due to be completed in 2019 at an investment cost of around €300m.
The group decided two years ago to increase its investment in development, Teufelsdorfer said. ‘We’re not just building for end-users,’ he said. ‘We will hold 86 apartments from ’52 Grad Nord’ in our own portfolio. We’re also looking for other sites in Berlin, although they are becoming harder to find. However, there are always opportunities,’ he added.
Further details of Vonovia’s offer are to be announced in February, when the bid will be officially launched. The acceptance period will run until 12 March 2018.
JP Morgan, Kempen, Victoria Partners and Freshfields advised Vonovia on the deal. BUWOG was advised by Goldman Sachs and Schoenherr. (ssk)