H1 DEALS: Residential and retail battle for supremacy in German Top-10

Consolidation and platform building led to the residential and retail property dominating the ranking of Top-10 real estate investment transactions in Germany during the first half of 2015.

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TOP 10 GERMAN REAL ESTATE DEALS
H1 2015

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1. Deutsche Annington to relaunch as Vonovia after buyout
2. Canada's HBC, US Simon take over Galeria Kaufhof real estate for €2.4b
3. Deutsche Annington acquires 20,000 resi units for €1.9b
4. Klépierre takeover bid for Corio declared ‘unconditional’
5. Patrizia acquires €900m portfolio of German and Swedish apartments
6. Adler's 'takeover' bond issue falls victim to Greek crisis
7. Orion seals €600m German office deal with financing from Helaba
8. NorthStar buys Frankfurt's Trianon tower for €540m
9. IVG acquires ECB tower in Frankfurt for €480m
10. Samsung in talks to buy Frankfurt tower for €450m

* preliminary data compiled by PropertyEU Research on reported investment activity from 1 January to 30 June 2015

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COMMENT

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The residential sector, which is at the centre of consolidation sweeping through the German listed property sector, claimed both the largest number and highest volume of the Top-10 transactions. Residential is represented by four transactions in the Top-10 with a combined volume of almost €7.5 bn, or 60% of the total volume of €12.5 bn, according to PropertyEU Research.

The largest transaction by some distance was German listed residential landlord Deutsche Annington acquiring Gagfah, number three in the sector, for €3.9 bn. The new super-landlord, rebranding as Vonovia, will have a portfolio of 350,000 apartments worth around €21 bn.

Deutsche Annington bulked up further by purchasing the 20,000-unit Südewo portfolio from Patrizia Immobilien for €1.9 bn. Patrizia is also in the Top-10 ranking as a buyer. In May Patrizia acquired 13,500 apartments in Germany and a further 600 in Sweden for €900 mln. Some 5,000 of the German units are located in Berlin, with the rest spread between the German metropolitan regions of Munich, Stuttgart, Frankfurt am Main, Cologne, Dusseldorf and Hamburg.

Patrizia flipped by the Swedish assets to domestic Swedish player Lernstenen Invest in July.

At end-June this year Adler Real Estate completed the €790 mln cash and share acquisition of Berlin-based listed landlord Westgrund to create the fifth largest German listed residential landlord with 50,000 units.

Retail
Merger & acquisition activity was also the driver behind the largest retail property transactions. Retail accounted for €3.4 bn, or 27% of the combined Top-10 volume.

In the second largest German transaction by volume in H1, a joint venture between Canada's Hudson's Bay Company (HBC) and US shopping centre giant Simon Properties acquired 40 department stores in Germany for €2.4 bn. The properties were spun off by HBC from its €2.8 bn acquisition of the Galeria Kaufhof department store chain in Germany and its Belgian unit Immo.

In January 2015 French-listed European shopping centre REIT Klépierre took over its Dutch counterpart Corio in a share transaction valued at €5 bn. Corio's German asset accounted for €1 bn of the total. The tie-up created the second-largest listed retail company in Europe with gross assets of over €21 bn. Market leader Unibail-Rodamco has €26.8 bn of shopping centre assets.

Five months later Unibail-Rodamco sold a a 46% indirect stake in German shopping centre developer-manager Mfi to Canadian pension investor CPPIB. The initial volume of €394 mln places the deal outside the Top-10, but additional funding commitments made by CPPIB as part of its platform building strategy lift the total potential value of the investment to €740 mln.

The office sector represents €1.6 bn of the Top-10 volume. The largest transaction in the sector saw Orion Capital Partners acquire the Odin office portfolio from Credit Suisse Asset Management for €600 mln. Odin consists of 11 properties spread over six German cities with a concentration in Hamburg and Berlin comprising 178,000 m2 of lettable space, of which 81% is currently let. Sales of office towers in Frankfurt take the final places in the Top-10.

For more on the German investment market in H1, see Germany sees investment recover to peak levels - BNPPRE