Deutsche Wohnen buys Baubecon resi portfolio for EUR 1.2b

Deutsche Wohnen has won the bid to acquire the Baubecon portfolio of 23,500 housing units in Germany in a deal worth EUR 1.2 bn. The transaction, which was financed with a combination of equity and debt, reflects a net initial yield of 7.7%. Credit Suisse advised the buyer.

The German listed property group emerged ahead of bidders including a joint venture of GSW and Goldman Sachs' Whitehall funds to take over the package from UK lender Barclays Bank.

The acquisition reinforces the company's presence in its core Berlin market while allowing it to enter new cities and diversify geographically, Deutsche Wohnen said. Around 40% of the units are located in Northern/Central Germany in the cities of Hanover, Braunschweig, and Magdeburg in Eastern Germany, while some 30% are in Greater Berlin.

According to those who track the market, around 82%, or 19,000 of Baubecon's units are seen as core by Deutsche Wohnen, while the remaining 4,000 units are expected to be sold over time. Analysts are forecasting a positive FFO impact from the operation of some EUR 30 mln for the first full year. 'The acquisition of Baubecon Group constitutes an attractive opportunity to further pursue its consistent value-creating growth strategy based on benefits from economies of scale and further improvement of the FFO profile,' Deutsche Wohnen said in a statement.

Baubecon fell into Barclays' hands at the end of 2011 when its former owners, RREEF and Prelios, were unable to repay the loan on the asset. The portfolio was valued at around EUR 1.8 bn at the peak of the market in 2007 and was sold to RREEF and Prelios for EUR 1.7 bn. It included 26,150 units at the time with a vacancy rate of 8%.

The deal, expected to be closed in the second quarter, will lift Deutsche Wohnen's portfolio from 50,000 to about 73,500 units, making the company the second-largest residential property owner in Germany after Gagfah.