Corestate to target big portfolio deals following IPO

Swiss asset manager Corestate Capital will home in increasingly on large portfolio deals, following its announcement this week that it is planning a €100 mln IPO, its CEO, Sascha Wilhelm, told PropertyEU on Thursday.

‘We’d like to participate more in retail portfolio deals of between €350 mln and €500 mln, or even more,’ he said. ‘We’re mainly looking at German retail portfolios, although we’d also consider office portfolios if they were a good fit. We’d also consider Spain, as we have a joint venture there.’

Zug-based Corestate announced on Monday that it is preparing an initial public offering on the Prime Standard segment of the Frankfurt Stock Exchange. While it has not disclosed when the IPO will take place, it said that it intends to issue €100 mln of new shares from a capital increase as well as to offer shares held by existing shareholders to allow for a free float of over 50% after the IPO.

Currently, 70.9% of the share capital is held by the company's two founders, Ralph Winter (64.2%) and Thomas Landschreiber (6.7%).Swiss listed firm Intershop Holding also holds a 28.1% stake.

‘We’re going to float Corestate to raise capital for expansion. The missing piece is more alignment capital. We think having many shareholders is good for business and will make it more flexible,’ Wilhelm said.

Corestate will list on the Prime Standard segment of the Frankfurt Stock Exchange rather than the SIX Swiss Exchange in its home market due to the size of the Frankfurt Exchange, coupled with the fact that Germany is the Swiss group’s main market, Wilhelm said.

Corestate said the offer will also include a customary greenshoe of up to 15% of the volume of the offering, comprising existing shares from the holdings of the existing shareholders.

The shares will be offered in a public placement in Germany and in a private placement to institutional investors in certain jurisdictions outside of Germany and outside of the US, Corestate added.

Mixed bag
Nonetheless, real estate IPOs can be something of a mixed bag. In July, Germany’s largest pfandbrief issuer, Deutsche Pfandbriefbank, floated on the Frankfurt Stock Exchange, with shares trading at €10.75. On 15 October, it was trading slightly down, at €10.42. The German state and HRE will continue to hold an indirect stake of between 20% and 24.9% for a two-year period.

Prior to the listing, pbb was fully-owned by state-owned HRE, which, in turn, is 100% owned by SoFFin, the Financial Market Stabilisation Fund set up by the German government following the collapse of Lehman Brothers in September 2008.

Moreover, other IPOs have not gone according to plan. Last week, Italian real estate manager Sorgente pulled the plug on its plan to list on Milan’s Stock Exchange, citing ‘insufficient demand’. Initially, the group had planned to issue a total of 134 million shares at a price of €3 each, giving the company an initial market cap of €440 mln.

The news marked Sorgente’s second failed attempt to float: it cancelled an IPO scheduled for November last year, blaming 'volatility in financial markets'. The announcement could also spell bad news for asset managers Idea Real Estate and Coima, which have both said that they plan to float in upcoming months.

Corestate has also been very active on the investment front this year. The firm´s co-founder and CIO Thomas Landschreiber told PropertyEU last week that it has invested €700 mln so far this year and plans to invest another €300 mln before the year-end. In June, it acquired a 170,000 m2 retail portfolio comprising 35 properties across Germany for €370 mln.

According to Wilhelm, the group already has a €1.7 bn deal pipeline, including deals in Spain. The firm is also hoping to invest another €200 mln in German high street properties before the year-end. ‘We are currently buying around 50 high street assets in Germany a year,’ Landschreiber said. ‘We're also buying retail properties in smaller German cities, with around 30,000 inhabitants as we see potential there.’

Student housing is also on the cards. The group has just acquired a plot of land in Berlin Mitte upon which to develop 160 student apartments, representing an investment volume of €20 mln. ‘We`d like to do more projects like this if we find the right opportunities,’ he added.

Around 90% of Corestate's portfolio is in Germany, with the remaining 10% in Spain, according to Landschreiber. Corestate had €1.5 bn of AUM as of end-June 2015.