Conwert drops €1.1b German residential acquisition

Vienna-listed Conwert Immobilien Invest has pulled the plug on the planned acquisition of €1.1 bn German residential landlord BGP.

On 6 August Conwert announced its board had passed a resolution to end talks with BGP Holdings Europe on buying the BGP Investment fund platform and its portfolio of 16,500 German apartments.

'After several weeks of detailed discussions, the administrative board of Conwert has decided that the acquisition strategically currently would not be in the best interest of Conwert and its shareholders,' the Austrian company said in a statement.

The news comes just over two weeks after the Austrians confirmed the two sides were in exclusive talks on a deal.

Dual-track process
The question now is whether BGP's managers can sit down quickly with other potential buyers or whether they will have to revisit the 'plan B' of listing the business. The idea of an IPO was shelved at least temporarily in recent months due to the Greek debt crisis and volatility on Europe's stock markets.

Selling or listing the business would reimburse 58,000 small shareholders who saw the portfolio shrink from €4 bn during the boom to a valuation of around €1 bn following restructuring in recent years.

Managing director Mark Dunstan told PropertyEU in an interview in June 2015 that BGP Investment was pursuing a ‘dual-track’ process whereby it is considering a sale or an IPO.

‘It’s very fortuitous that we’re selling a German residential portfolio at this time because interest in the sector is very strong,’ said Dunstan. ‘We have seen interest from a wide-range of investors, including private equity groups.’

The portfolio comprises 1.16 million m2 - or around 16,000 units - of which around 40% are located in Berlin, with the remaining properties mainly located in the north of the country, in cities such as Cologne and Kiel.

Possible premium
Market watchers had expected the BGP portfolio to command a high price. ‘It has a reported property book value of €1.1 bn but I think it will sell for a premium due to the strong interest in Germany’s residential sector,’ said Konstantin Kortmann, head of residential investment at JLL in Germany. JLL is not advising on the disposal process.

BGP is selling its German residential assets because shareholders inherited them following the firm’s restructuring in 2009 and the plan was always to sell them eventually. Dunstan said he was hoping to offload the portfolio by the year-end.

BGP started out as a joint venture between failed Australian investment and advisory firm Babcock & Brown and listed real estate firm GPT Group before being restructured in 2009 as an independent company in Luxembourg. The restructuring followed Babcock & Brown’s collapse into bankruptcy in the same year.