AXA Investment Managers
Matthias Leube - AXA Investment Managers Deutschland
‘The fragmented development market in Germany provides for significant growth opportunities,’ he added. Michael Tockweiler, CEO of SSN, described the deal as providing his firm with ‘excellent access to financing and allows us to continue to build on our strong financial base’.
Berlin-based developer Consus Real Estate has acquired 93.4% of shares in developer SSN Group, boosting its gross development volume (GDV) by around 50% to €9.6b.
‘A lot of capital wants to invest in German real estate,’ Matthias Leube, CEO of Colliers Germany, told REFIRE. ‘To secure good assets, buying a development platform can make a lot of sense. That’s not going to stop going forward.’
The acquisition, which values SSN at an implied enterprise value of around €1.1b, will be made through a combination of cash and shares. Consus has agreed to pay €255m for the 93.4% stake in SSN Group and will also acquire a 38.9% interest in SG Development GmbH, a 51% subsidiary of SSN Group, which holds nine out of twelve development projects. It will also acquire a 43% stake in an SSN landmark development in the centre of Berlin from Consus’ majority shareholder Aggregate Deutschland for €215m, against issuance of new shares in Consus at a price of €8 per share. The purchase price will be financed by cash on balance and a €250m acquisition facility from J.P. Morgan subject to customary drawdown conditions.
The deal is ‘significant, in terms of volume’, Dominik Tenhumberg, managing director of German real estate group Becken, told REFIRE: ‘We’re not used to seeing deals like that in Germany,’ he said. ‘We could see more consolidation among developers going forward because there’s a lot of capital looking for opportunities. Money is shifting more from core plus to more opportunistic options. We’ve been active in Hamburg for 40 years but we entered the Berlin market in 2013 – and then Frankfurt and Munich in 2015. Real estate is a very local business; you have to prove yourself when you enter a new market and Berlin, for example, has a very high entry barrier.’
For Consus’ CEO Andreas Steyer, the acquisition allows his group to ‘significantly strengthen [its] position as Germany’s largest property developer with a GDV of almost €10b, focusing on the highly sought after residential segment’. ‘The fragmented development market in Germany provides for significant growth opportunities,’ he added. Michael Tockweiler, CEO of SSN, described the deal as providing his firm with ‘excellent access to financing and allows us to continue to build on our strong financial base’.
International developers are also mulling entering the German market, according to Leube. ‘We helped some Japanese developers evaluate the German market recently (a confidentiality agreement prohibits him from divulging further details). However, it’s difficult if you don’t have a local partner or a European investment platform. For European players, it’s easier but even German developers are finding it hard to find the resources – namely, construction workers, given the lack of capacity.’
Tenhumberg agrees: ‘We develop offices and resi, both of which can be challenging in terms of getting building permits and of capacity constraints,’ he said. ‘A development project can take four-to-five years, which is a long time. We’re also interested in combined co-working and co-living spaces. It’s a substantial trend in the real estate industry. We currently have around €1.5b of projects under development, of which around half will probably be completed within the next 18 to 24 months.’
Bumper pipeline
The deal with SSN will also increase Consus’ number of projects to 65, up from 53. Combined, both companies have 2.1m sqm of projects either underway or in the planning stages up until 2026. SSN Group’s gross development volume currently sits at around €3.4b, consisting of 12 projects across nine German cities, including Berlin, Hamburg and Frankfurt. Residential projects account for 71% of the total, followed by commercial assets (26%) and others (3%). Like Consus, SSN’s business focuses on forward sales to institutional investors and the development of large city ‘quartiers’, such as the Holsten quartier in Hamburg and the Vaihingen Campus in Stuttgart.
Via its acquisition of SSN, Consus will be adding an additional €1.9b of ‘quartier’ developments to its overall GDV (around 43% of the combined GDV are ‘quartier’ developments). Of this, 35% is in Stuttgart and Munich.
SSN Group founders Michael Tockweiler and Theo Gorens will join Consus’ Extended Management Board. The deal is expected to close by the end of the year. (ssk)
