German residential portfolio sales 'unexpectedly weak' in 2H 2010: C&W

The sale of German residential portfolios fell sharply in the second half of 2010, resulting in just EUR 2.17 bn of residential deals over the year, down from EUR 2.61bn in 2009, according to Cushman & Wakefield.

In total, 41 residential portfolios of over 250 units - totaling 44,000 apartments - were sold in Germany last year. This represents a fall of 15% on the 52,000 units traded in 2009. Just 18 residential portfolios were sold in the second half of 2010, down from 23 deals in the first six months, according to Cushman & Wakefield.

However, according to Matthias Franz, an associate in Cushman & Wakefield’s corporate finance team in Frankfurt, the lack of supply - rather than lack of demand - is putting a dampener on the sector. ‘Private equity investors want to buy more residential assets in Germany but they don’t find the adequate product. They are interested in German residential because of the expected rental growth and the steady, granular cash-flow. They are screening the market and looking for opportunities,’ he told PropertyEU.

Despite the lack of supply, private equity buyers dominated the market last year, accounting for 47% of acquisitions, up from just 17% a year earlier, in a sign that credit markets are slowly unlocking. Listed property companies were the most active sellers, responsible for 42% of sales last year, up from 23% in 2009, according to Cushman & Wakefield.

And there were some sizeable deals: 12 portfolios of at least 1,000 units were sold last year. Among the biggest deals were Dutch-based BXR Real Estate’s acquisition of a 59% stake in the Tower Group, which comprised almost 10,000 residential and commercial units in cities such as Berlin and Wuppertal; Swiss investor Corestate Capital’s acquisition of the BGP portfolio, which totalled 4,700 units and Westminster Immobilien’s acquisition of a 2,380 unit residential portfolio in eastern Germany.

Interestingly, however, ‘big ticket’ portfolios did not dominate the market. Portfolios of 1,000 to 5,000 units accounted for the lion’s share of deals, at 57% of the total, up from 46% in 2009. Sales of portfolios with 5,000 to 10,000 units remained broadly the same as a year earlier, accounting for 13% of turnover, just a 1% increase on 2009.

This year, Jones Lang LaSalle is forecasting that the deal volume will increase to between EUR 3.6 bn and EUR 4 bn, partly because of state-owned portfolios that could come to market, said Malte Maurer, head of residential investment for Germany at JLL in Frankfurt. ‘There are some big portfolios that could be sold, including Berlin’s GSW portfolio (after GSW aborted its planned IPO in May last year) and Landesbank Baden-Württemberg’s portfolio of around 24,000 units. I would estimate that the GSW portfolio would sell for around EUR 650 mln, with LBBW’s fetching around EUR 900 mln,’ Maurer told PropertyEU. GSW holds around 33,000 units. BIH, a real estate fund manager owned by the state of Berlin, is still up for grabs. It comprises around 39,000 units that would likely fetch around EUR 1.6 bn, according to analysts.