The Zürich-based Peach Property Group, which invests in residential real estate in Germany, has bought a portfolio of 4,800 apartments in Germany, boosting its portfolio by 26% to more than 23,000 residential units. At the same time it plans a capital increase, into which US asset management group Ares Management Corporation will invest and become a 30% shareholder in the Swiss company, making it the largest single shareholder in Peach Property.
The acquired portfolio comprises a total of 295,000 sqm of living space, of which 44% of the properties are located in the triangle between Wolfsburg, Braunschweig and Magdeburg. Around 35% of the apartments are in North Rhine-Westphalia and complement Peach Property’s existing portfolio, while a third key focus is the industrial location of Ludwigshafen in Rhineland-Palatinate. Peach didn’t divulge any details about either the seller or the price paid, other than saying the deal is expected to close before year-end.
Peach’s earlier German residential holdings have tended to be high-yield properties, typically in secondary locations close to major conurbations. In addition to holding for the longer term, Peach also develops real estate for its own portfolio or for marketing as high-end residential properties of architectural merit for well-heeled international investors. The company has its German headquarters in Cologne.
US group Ares is investing €140m to become the new anchor shareholder in Peach Property, which will take the form of Ares buying the stake as part of Peach’s CHF 200m (€185m) capital increase. It will subscribe to CHF 150m of the issue in return for 30% in the company and becoming the largest single shareholder.
The issue will be in the form of convertible bonds with a coupon of 2.5% per annum which will obligatorily convert into equity at a conversion price of CHF 42.50 per share no later than 30 June 2021. Peach will use the funds to finance the latest 4,800-unit acquisition.
The latest portfolio has a vacancy rate of 10.8% and generates annual rental income of about CHF 19.9m.
Thomas Wolfensberger, Peach Property’s CEO, said: “In the course of the current year we have already acquired more than 10,000 apartments in Germany and hence underpinned our relevance as a player on this market.
“With a perspective of more than 23,000 units, which are concentrated in our core regions, we reached a size that allow significant benefits in terms of management, but also in the field of financing. Our fully digital platform and the Peach Point concept allow us to manage the residential portfolio in such a way that generates considerable economies of scale and synergies.
“The efficiency of the platform was recently proven again, for instance, by the reduction of the vacancies to 8.2 percent and the increase of the 'like-for-like' rents by 5.4 percent as per the first half year 2020 - and this in the midst of the COVID-19 pandemic.”
John Ruane, partner and co-head of Ares European Real Estate Equity, also commented on the new partnership. ‘Peach Property offers a unique opportunity to invest in one of the more defensive asset classes in Europe today whilst also benefitting from what we believe is an attractive growth trajectory for the company.”
