US private equity investor KKR has bought a majority stake in German residential specialist Velero as part of a plan to create a major residential platform in the country.
Under the deal, KKR will take an equity position from the company’s founders who will remain as co-investors in the business, which focuses on the asset management of residential units at affordable rents.
As part of the deal, the companies have also signed a binding agreement to purchase 7,500 residential units already managed by Velero from an institutional investor. The deal will transform the asset management company into an independent, fully integrated housing company and is the first step towards the creation by KKR of a major residential property platform in Germany.
Jan Baumgart, head of Real Estate Germany at KKR, said: ‘We are delighted to set the foundation for the creation of a high-quality, diversified housing company that will benefit from the dynamics in the German real estate sector. We now look forward to expanding the platform together and further improving the quality of living for tenants and the environmental footprint of the portfolio.’
‘We are very excited to have KKR’s support as we enter into the next stage of our evolution,’ said Sascha Giest and Thomas Lange, Co-Founders and Co-CEOs of Velero. ‘With our market experience and comprehensive knowledge of the portfolio to be acquired, we will deliver best-in-class service to our tenants. Furthermore, together with KKR, we will continue our growth trajectory.’
In addition to growing the portfolio through further acquisitions, Velero and KKR plan to continue to invest in the asset quality, outside areas and playgrounds as well as into sustainable ecological improvements. The overall goal is to reduce vacancy, all while ensuring affordable rents.
Christian Ollig, partner and head of KKR in Germany, said: ‘The acquisition is yet another proof for the importance of Germany in KKR’s investment strategy. It also marks a significant step in further expanding our local presence. With Velero we create a dedicated platform for further investments in the German residential rental housing market.’
The transaction is expected to close by year-end 2020. KKR is making the investment through its Real Estate Partners Europe II fund. Financial details of the transaction were not disclosed.
IPO plans
The announcement follows the collapse of Velero’s IPO plans earlier this year as a result of difficult market conditions. In early October the company announced that it was planning to raise up to €500 mln in an IPO on the Frankfurt stock exchange but was forced to shelve the public offering a few weeks later.
The company was planning to use the net proceeds to acquire three portfolios comprising a total of 10,189 residential units mainly located in mid-sized cities in North-Rhine Westphalia and East Germany.
