Deutsche Wohnen acquires 13,600 residential units for €1.2b

Deutsche Wohnen, the second-largest listed residential landlord in Germany which is embroiled in a hostile takeover bid, has reiterated its independence with a €1.2 bn investment deal.

The company announced on Friday that it has agreed to acquire the 13,600-unit Harald residential portfolio from Patrizia Immobilien, a German listed pan-European investor in commercial and residential property.

Patrizia put the investment volume at €1.1 bn, while Deutsche Wohnen said the full cost, including transferred liabilities, would come to €1.2 bn. It will be financed on a 50-50 basis with bank debt and existing funds. Based on the projected financing structure, the deal will increase Deutsche Wohnen's funds from operations (FFO) by about €40 mln after full integration.

Deutsche Wohnen owns over 150,000 residential units and 2,100 related commercial properties. The company said it was consistently pursuing a 'value-adding portfolio strategy' with a focus on selected urban and metropolitan areas. It has now acquired a total of 15,200 residential units since mid-year. Around 5,600 of the units are located in Berlin and another 3,800 are in Kiel.

Berlin
'After months of intensive preparations, we are expanding our portfolio in our core+ region of Berlin,' said CEO Michael Zahn. 'At the same time, we are exceeding critical mass in Kiel and are strengthening other locations. With this acquisition, we are demonstrating once again that we are able to realise existing potentials efficiently and thus generate value for our shareholders.'

The deal comes as Zahn and his board are attempting to fend off a €14 bn share-and-cash takeover offer from Vonovia, the largest listed residential property investor in Germany. The hostile bid has already sapped support among Deutsche Wohnen's shareholders in October for a friendly merger with the number three in the sector, LEG Immobilien.

Vonovia and LEG have been beefing up their portfolios in recent weeks. Vonovia is adding 16,000 units to its portfolio via the takeover of Bonn-based IVV Immobiliengruppe. Vonovia’s current portfolio, excluding the IVV properties, comprises 370,000 apartments with a total value of €23.1 bn. In addition, Vonovia has acquired property management and services company O-TEC, based in the Bavarian town of Landsberg-am-Lech, which manages 80,000 residential properties and 10,000 industrial units.

For its part, LEG Immobilien announced on 3 November that it was acquiring 13,000 residential units from Vonovia for €600 mln. LEG now owns 110,000 residential units.

Flipping assets
The rush among Germany's top landlords to bulk up their portfolios is such that the assets involved in the Deutsche Wohnen-Patrizia transaction have now traded for the second time in six months.

Patrizia originally acquired the portfolio last May while taking over a Swedish fund called Hyresbostäder i Sverige III Gul. 'The sale marks the next systematic step in the investment strategy that was announced when we made the acquisition, namely to move forward quickly with the placement of the residential portfolio,' said Patrizia CEO Wolfgang Egger.