German residential developer Instone Real Estate signed a sizeable forward deal just before Christmas with Wiesbaden-based insurer R+V Versicherung for a major yet-to-be-built residential development in Schorndorf, near Stuttgart. At the same time the Essen-based Instone completed a major overhaul of its corporate financing to reduce the complexity and level of its debt and broaden the debt investor base.
The forward residential project was done with GWG Group, a subsidiary of R+V Versicherung. The portfolio consists of 18,000 sqm of residential space and 1,200 sqm of commercial premises, comprising 224 apartments and four townhouses and more than 200 parking spaces. The project, based on the site of the 1.3 hectare brownfield of the former Breuninger leather goods factory, is due for completion in 2023.
The acquisition is part of R+V’s project to create a national portfolio of residential property holdings in and around economically strong regions, through buying turn-key new-build construction projects and existing large-scale housing estates and portfolios.
On the re-financing side, Instone secured about €400m of fresh financing to support its mid-term growth strategy, on top of its available funds including cash and undrawn lines of credit of about €200m at year-end.
According to Foruhar Madjlessi, Instone’s CFO, the key reasons for the refinancing were: “Firstly, we intend to unravel the complexity of our funding structure by concentrating our corporate level financings entirely on the level of Instone Real Estate Group AG. Secondly, we have diversified our financing instruments and broadened the debt investor base. Thirdly, we have successfully termed out our debt maturities. By reorganising our corporate level financing, we have implemented a sound and stable foundation for our continued future growth.”
Explaining further, he said the refinancing is based on the following three pillars. First, a syndicated credit facility of up to 200 million euros provided by Deutsche Bank, of which 75 million euros have been drawn down so far. Second, 106 million euros promissory notes arranged by IKB Deutsche Industriebank. Third, a syndicated three-year recurring credit facility (RCF) for an aggregate amount of up to 84 million euros. The three-year RCF with its two one-year extension options was arranged by Sparkasse Hannover.
“To see a syndicate led by Sparkasse Hannover provide a credit line of this magnitude is impressive and proves the strength and relevance of the savings bank sector,” Madjlessi says. The maturities of the new facility agreements all range from three to five years. Looking ahead, said Madjlessi, the company plans to continue diversifying the investor base further, while a corporate bond issuance remains a possibility.
