Conwert in exclusive talks to buy €1.1bn BGP portfolio
Barely three months after fending off a takeover offer for itself, Austrian listed property company conwert Immobilien Invest is in exclusive talks to buy the €1.1bn residential property asset portfolio of BGP, the company spun off by the Australian GPT Group in 2009.
Conwert said it was “currently conducting a comprehensive due diligence review of the relevant assets. Conwert has not until now entered into any binding agreements concerning the potential acquisition of the relevant assets and the outcome of the related discussions is completely open."
BGP owns 16,500 apartments located across German 'growth' markets, with about 40% of the units in Berlin. The rest are spread across the country, with a concentration on university cities such as Cologne, Münster, Munich, Nüremberg, Kiel and Bremen. BGP's parent company in Australia had been looking at a possible IPO in Germany as an exit for its 58,000 Australian investors, most of whom are thought to be small investors.
Last year BGP engaged boutique house Lazard to advise on its options and Credit Suisse and JPMorgan were subsequently appointed to work on a potential float, along with BNP Paribas and Germany's Berenberg Bank. A flotation would have been expected to raise €300m-€500m. The discussions with conwert therefore represent a likely shift in strategy in favour of a trade sale.
It's been a rocky road for the investors, who ended up holding the BGP units after GPT hived off its European property holdings in 2009 from an ill-fated partnership with failed Australian investment bank Babcock & Brown. At one point BGP's portfolio was value at nearly €4bn - with properties ranging from shopping centres in Spain and real estate in Sweden, Holland, France, Lithuania and Germany - although this had shrunk to €2.3bn by 2009 after radical restructuring under managing director Mark Dunstan.
According to an article in The Australian newspaper, BGP's chairman Rod McGeoch was quoted as saying that market volatility had shifted the group's thinking away from a market listing – possibly in September - as an exit, in favour of a trade sale. McGeoch said BGP would only sell the portfolio for more than its net asset value of about €700m, and 58 trade buyers had signed confidentiality agreements to look at the portfolio.
According to Till Schmiedeknecht, the head of subsidiary BGP Asset Management, it had become increasingly difficult to give a clear profile to the portfolio to make it attractive to Australian institutional investors. Over the last four years the remaining properties in the portfolio have been streamlined, rents increased (by up to 20% per sqm), vacancies lowered (from 9% to 6.1%) and tenant fluctuations stabilised. Many assets had been converted from office use to student accomodation, or otherwise modernised, so the portfolio would be attractive to several buyers.
In April, conwert shareholders rejected an offer by Deutsche Wohnen AG to buy its portfolio of 30,000 German and Austrian housing units for €980m.