RREEF, Prelios teeing up €1bn German residential sale – report

Deutsche Bank real estate subsidiary RREEF and its partner Prelios are reported by Bloomberg this week to be lining up the sale of the DGAG residential portfolio in northern Germany, in a move designed to take advantage of the ongoing institutional interest in the German residential sector.

Prelios (formerly Pirelli Real Estate) bought the 10,000-apartment portfolio in 2007 at the height of the property boom, and subsequently sold some of the properties into its joint venture with RREEF. The apartments are located mainly around Hamburg and Lübeck. At the time the assets were valued at €1.4bn, and were 80% debt-financed, although the joint venture has sold part of the portfolio since then. While German residential prices roses by 7.4% nationwide last year, according to Berlin-based online broker ImmobilienScout24, Hamburg was a particularly strong performer, rising 10%.

Prelios has been on a steady retreat from Germany since those heady pre-credit crisis days, and has largely been consolidating itself into an asset manager for third parties since then. Along with its joint venture partner RREEF, it walked away from its ownership of the 27,000-unit Baubecon portfolio, for which it had paid private equity group Cerberus €1.6bn, when their equity investment was wiped out after a fall in values and pending maintenance obligations. Barclays Bank subsequently sold the portfolio in 2012 to listed residential investor Deutsche Wohnen AG for €1.2bn.

In December, Prelios was part of a consortium of owners that sold several major retail assets, including Berlin’s KaDeWe departments store, in a deal valued at €1.1bn.

RREEF, too, is capitalising on strong foreign demand for German assets to dispose of some of its bigger holdings. It also said last week that it was in exclusive discussions to sell its 70% stake in French department store operator Printemps to joint-venture partner Borletti Group of Italy, with whom it has several partnerships, and a Qatari investment group.

Known to be interested in taking over its rival is retailer Galeries Lafayette, who will doubtless be following the RREEF negotiations closely. The Chinese company Dalian Wanda Group also made their interest in the Printemps group very clear to French business media in December last.

Meanwhile, private equity investor Blackstone, the largest worldwide manager of real estate private equity funds, also said last week that it plans to sell a portfolio of 8,000 mainly Berlin, Dresden, and Leipzig-based apartments valued at about €400m. Blackstone is thought to have paid about €220m for the units last year to the administrators of the insolvent Level One portfolio, a German asset manager which went bankrupt in 2008 with about €1.3bn in debts.