France’s FdR expands, Icade departs from German market

It was a tale of executing diametrically opposite German strategies for two leading French property companies over the past few weeks, as one leading French REIT took a decisive step to boost its residential holdings in the country and the other made an equally decisive step to exit the German market altogether, to refocus on its home market.

French REIT/SIIC Foncière des Régions (FdR) signed a purchase agreement for around €240m via its German housing subsidiary Immeo to buy a portfolio of 3,400 residential units in Berlin and in Dresden, along with 100 commercial units, totalling 201,000 sqm.. The price equates to about €1,200 per sqm, while rental income on the portfolio is about €15m annually, representing an immediate gross yield of 6.3%.

The seller was a long-standing Danish investor, and the deal was brokered by Dr. Lübke & Kelber, which had been the asset manager on the portfolio since 2006. The deal is expected to go through by late-July, and is being financed both by bank debt and through an Immeo capital increase.

The Immeo acquisition comes on top of the purchase of about 4,000 apartments last autumn, likewise in Berlin and Dresden, for €351m. FdR has been an active investor in German residential since 2005, and prior to this latest transaction has built up a portfolio of more than 40,000 housing units in Germany, mainly in Rhine-Ruhr, Berlin and Dresden.

According to FdR, “With this transaction, Foncière des Régions confirms its strategy to strengthen its positioning on the German residential sector…A promising market in terms of residential property, Germany has value creation potential which is reflected in the regular increase of rents at constant scope and capital gains in the long term.”

Ulrich Jacke, managing partner at Dr. Lübke & Kelber, which has been intimately associated with the portfolio after managing it for the last eight years, also commented on the sale: “We don’t see our job as just the passive administration of real estate stock while the years go by. For us, asset management means to preserve and increase the value of the properties…It is also important to keep an eye out for the right time to sell.”

Meanwhile Icade, the French REIT (SIIC) controlled by French state-owned financial institution Caisse des Dépôts, said last week that it had sold nearly its entire €160m German asset portfolio in a bid to refocus its business back onto the commercial sector in the Greater Paris region.

In a press statement, Icade said its German portfolio at end-December comprised three office properties in Munich, Hamburg and Frankfurt, and three development plots in Berlin and Dusseldorf – valued at about €160m. At the beginning of June, Icade sold and transferred the Munich asset (59,154 sqm in Dachauer Strasse in M-Allach) to a group of international investors (although not named by Icade, REFIRE believes the buyer to be London-based private equity group Maple Knoll Capital, with financing of €90m from the increasingly-active HSH Nordbank), and the two plots of Berlin (7,335 sq.m.) to a Berlin developer.

Maple Knoll is a London-based private equity investor focusing on value-add and opportunistic real estate. It is headed up by Phillip Burns, a recent former CEO at Corestate Capital and Terra Firma Capital Partners.

The other 19,524 sq.m. plot in Dusseldorf and the 9,475 sq.m. building in Hamburg are currently merely awaiting the notary’s signature on their sale. The total value of these disposals is in line with book value, Icade said.

These sales will leave Icade owning only the property in Frankfurt, which consists of a complex of two office buildings and a plot of land for development (in the Goldsteinstrasse in Niederrad). This last commercial lot is subject to an exclusivity agreement with a local developer which Icade hopes to realise before year end. “Complete withdrawal from Germany will allow Icade to lower the share of non-strategic assets in its overall portfolio from 5.5% on 31 December 2013 to 3.7%,” it said.

Icade had originally entered the German market in 2006 by buying a portfolio of partly-empty office buildings and 13 development plots from Daimler-Chrysler for about €313m. The group is a major player around Greater Paris and active in regional development. For 2013, it posted an EPRA earnings from property investment of €214m, and at year-end owned EPRA triple net asset value of €5.7bn, or €77.3 per share.