Deutsche Real Estate Funds (DREF) has placed a €44 mln bond via a subsidiary to fund the acquisition and refurbishment of student residences in Germany.
Deutsche Real Estate Funds (DREF) has placed a €44 mln bond via a subsidiary to fund the acquisition and refurbishment of student residences in Germany.
The senior secured mortgage-backed bond is the first student housing bond to be issued in Germany and was placed with major German institutional investors. It has a five-year term to maturity, carries a coupon of 4.675% per annum and has an investment grade rating (BBB) from Creditreform.
The German student housing market needs private investments, according to Felix Bauer, CEO of Deutsche Real Estate Funds Advisor (DREFA). '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.'
The issue proceeds will be used for the acquisition and refurbishment of five student residences in four German university cities (Berlin, Bremen, Kiel and Stuttgart). The refurbished residences will be available to almost 1,000 students by the start of the 2015 winter semester.
According to Shaun Robinson, CEO of Somerston Capital and a member of the DREFA’s Management Board, the bond issue positions DREF as 'an absolute pioneer' in Germany. 'For the first time, institutional investors are able to participate on the capital market in student accommodation in Germany. A great deal of potential still exists in the market segments of student housing and micro-living. Accordingly, this most probably was only the start.'
Somerston Capital and Internos Global Investors together purchased a participation in DREF early in 2015 totalling 27.5%.
Thanks to the immense interest of German institutional investors in this asset class, DREF is planning a private placement for the coming months. DREF has already acquired further development properties and will also reinforce its portfolio of existing properties. To this end, the company has arranged a capital line of €50 mln 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.
Deutsche Real Estate Funds specialises in property investments with a particular focus on student housing. DREF covers the entire value-added chain from the selection of properties through financing to modernisation and subsequent management.