Aurelis, ADO, Publity all lining up for market listings
The markets are in need of a good story, after the surge in German real estate companies’ share prices over the last few years, and that story is consolidation. Among existing listed companies, merger fever has gripped the markets. Deutsche Annington has just taken over rival Gagfah for €3.9bn, Adler Real Estate has secured a majority shareholding in residential housing company Westgrund AG, and Germany’second-largest residential investor Deutsche Wohnen is engaged in a battle to swallow Austrian housing specialist Conwert Immobilien.
For the moment, there is capital a-plenty to fuel the market’s fantasies for synergy, scalability and size. Likewise, the huge amount of capital raised by Germany’s listed property companies in 2014 has encouraged several privately-held companies to take their chances on the stock exchange, particularly while investor appetite towards the sector remains so favourable.
Property share sales reached a record €4.8 billion last year, 29% more than in 2013, according to data compiled by Dusseldorf- based Barkow Consulting. In 2014, the FTSE/EPRA NAREIT index of German real estate stocks gained fully 40%. They’ve been rising even stronger since the start of this year.
Among those in Germany making preparations for an IPO are Aurelis, Ado Properties, and the Australian group BGT, and asset manager Publity.
Grove International Partners, owner of German developer Aurelis Real Estate, is reported to be considering floating Aurelis on the stock market, in a move which could take place as early as this autumn. Grove is said to have appointed Deutsche Bank and UBS as global co-ordinators for the listing.
Grove is a property investment firm backed by hedge fund manager George Soros, and founded by Richard Georgi in 2004 after its earlier incarnation as Soros Real Estate. The Frankfurt-based Aurelis was valued at about €500m (not including debt) in November 2013 based on a valuation published by previous co-owner Hochtief AG.
After a chequered history since its foundation in 2002 as a subsidiary of railway operator Deutsche Bahn in 2002, during which it was 50%-owned by WestLB and Hochtief AG at different times, Aurelis manages and develops offices and logistics properties in cities from Cologne to Frankfurt and Munich.
Hochtief and Grove had bought the company for €1.6bn in 2007, but several assets have been sold off since then. Hochtief, the German bulder controlled by Spanish group ACS, sold its stake in Aurelis last year to Grove.
Meanwhile, the Berlin-based ADO Properties, a residential investor with a focus on the German capital, is also said to be heading for a stock market launch later this year. Ado, whose parent company is listed in Tel Aviv, may be planning to announce a secondary share sale by the end of the first half, insiders close to the deal have been quoted in the German business press as saying.
We said last month in REFIRE that a flotation could raise €300-400m based on the company’s ownership of about 235 properties with 9.000 apartment units in Berlin, with total market capitalisation of just below €800m, although the size of the potential placement is not known. Investment banks UBS and Kempen are said to be preparing the flotation, with Freshfields as the advising lawyers.
Since then ADO has bought a Berlin residential portfolio from Deutsche Wohnen, paying €375m for a total of 5,750 apartments in the city’s Spandau and Reinickendorf districts, bringing its portfolio to over 14,000 units. The apartments have an average in-place rent of €5.10 per sqm per month, with a 3.5% vacancy rate.
REFIRE briefly met with Rabin Savion, the CEO of ADO Properties at the recent MIPIM in Cannes and we look forward to getting to know the company better. This latest leap forward in the ADO’s assets under management suggest the company has a clear plan for the next few years to gain critical mass in Berlin housing.
With figures from the CBRE/Berlin Hyp Housing market report showing that the average rent for new residential leases in Spandau is €6.75 per sqm per month, and in Reinickendorf €7.08 per sqm, there would indeed seem to be upside potential. According to Savion, “We see great value potential and high demand for apartments in the outskirts of Berlin, since rent levels have been continuously rising in inner-city locations over the last few years, along with a decline in available residential units. We are convinced demand will grow in the outskirts to benefit from more affordable rents.”
Finally, the Leipzig-based asset manager Publity is taking the plunge onto the stock market as early as April 2nd. The company specialises in investing in high-yielding office properties in large German cities and applying a ‘manage to core’ approach. It provides a range of asset management services for the assets allocated to its currently seven funds set up over the past ten years.
The IPO is designed to broaden the investor base (Chairman Thomas Olek is still the majority shareholder) and provide financing alternatives for portfolio expansion other than co-investments. For 2015 Publity has said it wants to invest up to €1bn in office properties in the largest cities. The group earned EBIT in 2014 of €4.7m on €9.8m in revenues, with €600m of assets under management in its various funds. Baader Bank is lead manager for the market flotation.