Student housing investor Deutsche Real Estate Funds (DREF) has increased the volume of its bond issued in June 2015 by €33 mln as part of a private placement with institutional investors.
Student housing investor Deutsche Real Estate Funds (DREF) has increased the volume of its bond issued in June 2015 by €33 mln as part of a private placement with institutional investors.
The total volume of the bond now stands at €77 mln and the proceeds will be used for the acquisition and refurbishment of three student residences in Bochum, Essen and Kiel.
The bond portfolio had previously consisted of five residences located in Berlin, Bremen, Kiel and Stuttgart. The first students moved into these properties for the 2015/16 winter semester on schedule following extensive modernisation work.
'We’re delighted that we were now able to reinforce our bond volume at the request of a number of investors and to achieve our targets set for this year. This goes to show that we can also finance student accommodation in Germany via the capital market,' said Felix Bauer, CEO of Deutsche Real Estate Funds Advisor.
DREF has put together a portfolio of 2,300 student residential units within a period of two years, with an 1,700 additional units to be added by the end of this year. Bauer said the company aims to at least double the current portfolio by the end of 2016. 'We plan to finance part of these additional acquisitions by means of a further bond issue scheduled for the first half of 2016,' he said.
Institutional equity
DREF's announcement on the increase in the bond comes a day after the company participated in a student accommodation event in Amsterdam. The Class Conference, the annual conference held by sector organisation The Class of 2020, attracted 460 delegates, up from 200 last year.
The conference heard that student housing in Europe is rapidly transforming from an under-funded niche to fully fledged alternative asset class that is attracting more and more institutional equity due to its stable return profile. In addition, investors, local authorities and universities are increasingly working together to create suitable accommodation to attract and retain the types of young, highly educated students required for economic growth today.
Germany is at the epicentre of the growth in the student accommodation sector in Europe. DREF is one of the main private providers of student housing in Germany. The company has over 2,300 residential units in its portfolio, with 600 further units added in Bochum, Essen and Kiel as a result of the bond increase.
The bond runs until 2020 with a coupon of 4.675% interest per annum. It is senior secured mortgage-backed and has an investment grade rating (BBB) from Creditreform.
The institutional investors backing the volume increase include the insurers Versicherungskammer Bayern, Germany’s largest public insurer, and Barmenia Versicherungen, both of which had already participated in the original bond issue in June.