Deutsche Wohnen acquires Berlin residential portfolio for €655m

German listed residential landlord Deutsche Wohnen has acquired a portfolio of 3,900 residential units and 270 commercial units in Berlin from an unnamed seller for €655m, it announced earlier this month.

The purchase price amounts to €2,390 per square meter, implying a multiple of 20x based on market rents or 30x based on in-place rents. The portfolio, which comprises high quality ‘pre-war’ assets that are centrally located, generates a yearly rent of €22m and has an occupancy rate of 93%. The acquisition will be financed through the proceeds of the recent successful placement of new shares and Deutsche Wohnen’s new convertible bonds.

‘It’s the biggest asset portfolio we’ve acquired in Berlin since we acquired GSW in 2013,’ a company spokesman told REFIRE. ‘Berlin is such a dynamic market but it’s hard to find a good quality residential portfolio of this size. We will now optimize the 7% vacancy rate. We’d be interested in similar portfolios in other German cities, too.’

Such portfolios represent a rare opportunity in the German market, according to Alexander Kropf, head of capital markets Germany at C&W. ‘It’s the biggest residential deal so far this year. Other than M&A activity, there are few residential deals in excess of €100 mln to €200 mln,’ he said.

And although something of an anomaly, mega deals can sometimes be found. In October last year, Luxembourg-based BGP Holdings sold its European residential property portfolio comprising all of the business and assets of BGP Investment to vehicles managed by Morgan Stanley for €1.17b, including net debt. The portfolio comprised 1.16m sqm of residential stock - or around 16,000 units - of which around 40% are located in Berlin. The remaining properties are mainly located in the north of the country, in cities such as Kiel and Cologne.

In recent months, Berlin-based Deutsche Wohnen has made a foray into senior living facilities in Germany and is now on a drive to expand in the sector, the company spokesman said. ‘At the moment, senior housing accounts for 7% to 8% of our portfolio. We think we could increase that to between 10% and 15%, although we don’t have a fixed timeframe,’ he said.

In August last year, Deutsche Wohnen acquired a senior living portfolio of 28 assets from Berlin’s bad bank Berlinovo for €420m, marking the country’s largest deal in the sector. The portfolio, which comprised more than 4,000 beds, is let on long-term leases.

International institutional investors and private equity groups have ratcheted up their exposure to German healthcare properties in recent months in a bid to tap the largest care home sector in Europe.

Last month (February), Deutsche Wohnen successfully placed €800m new convertible bonds and cash capital increase with gross proceeds of around €545m. The new convertible bonds, which will mature in July 2024, are initially convertible into approximately 16.5m new or existing ordinary no-par value bearer shares of Deutsche Wohnen or can be repaid in cash. The new convertible bonds were issued at 100 % of their nominal value and with a 0.325% coupon.

Deutsche Wohnen is one of the largest publicly listed residential property companies in Germany and Europe with a business focus on managing and developing its mainly residential property portfolio. As at 30 September 2016, the portfolio comprised a total of 160,474 units, of which 158,274 were residential and 2,200 commercial.