German listed residential firm Adler Real Estate has announced plans to acquire a stake of up to 70% in the €1.6 bn Tel Aviv-listed German-focused Brack Capital Properties (BCP) for €540 mln.
Adler has entered into a share purchase agreement with Brack's major shareholder Redzone Empire Holding for the acquisition of a 41.04% stake in BCP. In addition, senior management members of BCP have agreed to tender their shareholdings representing a combined 5.62% in the company in the special tender offer to be launched by Adler on a further 25.8% of BPC.
Adler is offering 440 Israeli New Shekel (€100) per share to all shareholders, in a deal worth a total of €540 mln at the current exchange rate.
BCP is a public limited liability company incorporated under the law of the Netherlands. It owns a real estate portfolio containing more than 11,000 residential units in Germany of which two thirds are located in A-locations. The portfolio is concentrated in major German cities, among them Leipzig (30 %), Bremen (10 %), Dortmund, Hannover and Kiel (each 9%), overlapping with the existing ADLER portfolio.
'With the acquisition we have not only significantly grown our portfolio, but have also initiated a profound quality transformation,' said Tomas de Vargas Machuca, Co-CEO of Adler Real Estate. 'The overlap and the new scale allow us to generate operational synergies of around €3 mln annually, as we can integrate the property and facility management into our already existing operational structures."
The BCP portfolio has a higher average rent and a higher occupancy rate than Adler's current portfolio. It also includes development projects in central Düsseldorf and Aachen for nearly 2,000 residential units.
The acquisition will have a positive impact on nearly all financial metrics, according to Adler. It will contribute an annual rental income of €45 mln, while adding €20 mln in funds from operation per annum, added De Vargas Machuca. 'We will boost our earnings by around 50%,' he noted.
The acquisition and the special tender offer will be financed with Adler's existing cash, the proceeds from the recent sale of its stake in Accentro Real Estate as well as the sale of non-core residential assets, for a total of around €350 mln. The remainder will be financed with an in-place bridge loan financing agreement.
Adler does not rule out that it may decide to acquire all remaining shares in BCP in the mid- to long-term.
'This is a major step for Adler to grow further and at the same time improve both its earnings and financial standing. It will thus be greatly benefitting to the interests of our shareholders,' said Adler's Co-CEO Maximilian Rienecker.
Adler is being advised by Kempen and J.P. Morgan.
