Domicil buys 2,535-unit German portfolio from Swiss Life

In a significant German residential housing deal, Munich-based investment and asset manager Domicil Real Estate Group has bought a portfolio of 86 residential properties in Germany from a fund of Swiss Life Asset Management as part of an asset deal.

For Domicil, it is its largest-ever transaction for its own account, and the company will retain the assets in its own portfolio. Financial details of the deal were not disclosed.

The assets in the so-called NOW portfolio are spread across 20 locations in seven urban clusters throughout Germany, more than half in state capitals, and about 20% in the northern and northeastern cities of Bremen, Lübeck and Berlin. Others are evenly spread across cities such as Dresden, Erfurt, Rostock, Leipzig, Hanover as well as Dortmund, Gelsenkirchen and Düsselforf in the more westerly North Rhine-Westphalia.

The total lettable area is 156,436 sqm, and comprises 2,535 rental units in total, with all but a handful being residential units. The vacancy rate is 7%.

Andre Schmöller, chief investment officer of Domicil Real Estate said that Domicil had prevailed after many rounds of hotly-contested bidding process, organised by CBRE. "The purchase of the 'Now’ portfolio is another important step in our growth strategy and promises enormous development potential.

"The concentration on economic conurbations means that we can expect units to be easily lettable and a high level of demand for the condominiums. The current vacancy rate also provides an opportunity to make more rented housing available and to stabilise rental income."

However, he indicated that this was probably the last major purchase this year, as it would "take some time to digest this portfolio".

He described the assets as 'unspectacular', made up mainly of classical multi-family houses in 'good condition' and with affordable rents (average of about €6.50 per sqm). The average apartment size is 61 sqm, very much a sweet spot for the kind of city apartments much in demand, he said. 85% of the apartments have less than 80 sqm, while about 40% of the units have been refurbished since 2015.

Daniel Preis, chief sales officer of Domicil, said: 'In addition to the locations, it is above all the apartment fit-outs that are ideally suited for letting. The acquisition is very interesting for tenants as well as for retirement provisions on the part of capital investors.'

Domicil plans to invest about €10m in further upgrades to the portfolio, with a view to privatisation at a later stage.

Swiss Life is though to have invested about €15.5m in sustainably managing the portfolio over recent years, before putting it on the market. Michael Essl, chief investment officer of Swiss Life Asset Managers in Germany said: 'Despite this sale, real estate remains one of our most important asset classes. In terms of our active portfolio management, this is an important step for us to further diversify our portfolio.'

Domicil had originally planned an IPO two years ago pre-pandemic, but pulled it at the end of 2019 citing adverse market conditions. This latest deal may indicate the company is plumping itself up before making another stab at a public flotation.