DREF places €44m bond to fund student housing in Germany

Deutsche Real Estate Funds (DREF) has placed a €44 mln bond to fund the acquisition and refurbishment of five student residences in four German university cities.

The bond has a five-year term to maturity and carries a coupon of 4.675% per annum. It is a senior secured mortgage-backed facility and has an investment grade rating of BBB from Creditreform.

The bond was placed with major German institutional investors and marks the first time institutional investors are able to participate on the capital market in student accommodation in Germany, DREF said.

‘The German student housing market needs private investments. The supply gap and refurbishment bottleneck of student accommodation cannot be resolved with public funding alone. We have now shown that these investments can also be funded via the capital market in Germany, if only in the institutional segment. This affirms the strategy and business model we have embarked on,’ said Felix Bauer, CEO of Deutsche Real Estate Funds Advisor (DREFA).

The five student halls are located in the cities of Berlin, Bremen, Kiel and Stuttgart. Almost 1,000 students will be able to move into newly refurbished units by the start of the 2015 winter semester.
Shaun Robinson, CEO of Somerston Capital and a member of DREFA’s management board, said a great deal of potential for further institutional involvement still exists in the market segments of student housing and micro-living. ‘Accordingly, this most probably was only the start,’ he said.

Somerston Capital and Internos Global Investors together purchased a participation in DREF early in 2015 totalling 27.5%.

Due to the 'immense' interest of German institutional investors in student housing, a private placement is planned for the coming months, DREF said. The company has already acquired further development properties and will also add to its portfolio of existing properties. To this end, the company has arranged a €50 mln credit facility with an international major bank.

The €44 mln bond was placed via an issuance vehicle (Deutscher Studenten Wohn Bond I S.A.) that holds the student residences directly or via intermediate companies. The issue was accompanied by IKB Deutsche Industriebank AG (IKB) as sole bookrunner.

The joint lead managers were IKB and equinet Bank AG, with BankM - Repräsentanz der biw Bank für Investments und Wertpapiere AG acting as co-lead manager.