DREF issues €44m first German student housing bond

Student housing manager Deutsche Real Estate Funds (DREF) has raised €44m through Germany's first student housing bond issue, The five-year 'Deutsche Studenten Wohn Bond I' carries a coupon of 4.675% annually, and was subscribed to by exclusively German investors.

The bond is senior secured mortgage-backed and has an investment grade rating (BBB) from Creditreform.

DREF had originally planned to pay 4.375% on the bond and issue a volume of up to €100m back in April, and didn't offer an explanation for the somewhat smaller issue. Nonetheless, DREF said there was "immense interest" from investors for the student housing sector, and it was planning a further private placement over the coming months.

The firm, in which institutional fund manager Internos Global Investors and family office The Somerston Group hold a joint 27.5% stake, has also taken a €50m loan from an international bank for its development pipeline.

According to Felix Bauer, the CEO of DREF and head of DREF's majority shareholder the Bauer Group, "The German student housing market needs private investments. The supply gap and refurbishment bottleneck of student accommodation cannot be resolved with public funding alone. We have now shown that these investments can also be funded via the capital market in Germany, if only in the institutional segment."

Proceeds from the issue will be used to buy and refurbish five student residences in Berlin, Bremen, Kiel and Stuttgart. DREF said around 1,000 students will prospectively be able to move into the refurbished units by the start of the 2015 winter semester.

Meanwhile, one other bond issuer fell foul of the unstable climate caused by the Greek crisis talks. Frankfurt-listed Adler Real Estate pulled its plans for a convertible bond issue to fund its recent takover of Berlin peer Westgrund, saying in a statement that "it is in the best interest of the company not to pursue a capital markets transaction in the current market environment."

Adler completed its takeover of the residential invest in June by buying 95% of Westgrund's shares for €790m in cash and shares. It says the cancellation of the bond issue has not affected the takeover.