German multi-family transactions to top €10bn this year prompted by loan maturities

German multi-family transaction activity has raced to more than €6bn in the first six months of the year and remains on track to more than €10bn in the highest annual deal flow in five years, according to investment agent and adviser Savills.

Savills said the first half of the year saw €6.13bn of transactions change hands – a 75% rise on the same period last year. The catalyst for such bulky portfolio sales this year is the maturity of seven year balance sheet and CMBS loans, following Germany’s sell-off of housing association stock in the middle of the last century.

Two weeks ago, CoStar News revealed that Gagfah was bringing to market the 43,000-strong Dresden multi-family portfolio for around €1.7bn later this quarter, while two months ago Deutsche Wohnen bought the 23,500-strong BauBeCon portfolio from Barclays for €1.235bn, financed by three separate senior debt facilities from four banks worth just under €800m combined.

In April, Cerberus Capital Management closed the €900m purchase of the 22,000-strong German multi-family portfolio formerly-owned by bankrupt property group Speymill Deutsche Immobilien Company (SDIC), financed by a restructuring of legacy debt.

CoStar News first reported the scale of the refinancing-led fractional activity trend back in March in a two-parter, highlighting both the major portfolio trades and the largest five CMBS loans dure for maturity by the end of next year, at the time, amounting to €10.7bn.

Savills said the number of units over the first half of this year has almost doubled from 64,266 to 119,500 units, compared to the same period last year.

Draženko Grahovac, managing director of corporate finance, valuation at Savills Germany, said: “Over the past two years we have seen packages comprise mostly of a thousand units, but this year large-volume deals are clearly dominating.

“Market fundamentals for this type of transaction are favourable with a number of large-scale portfolios up for sale, strong investment demand and funding for such deals is also feasible. This has not been the case for a long time.”

German buyers dominated the residential portfolios investment market in H1 2012, accounting for circa 80% of investment activity, similar to Q1 2012 and H1 2011.

Listed property companies and REITs were by far the most active buyers with a 43% share of the transaction volume during the first six months of the year. Insurance companies and pension funds as well as private equity funds followed with a share of 26% and 18%, respectively.

Berlin dominated investment activity with over 26,000 residential units sold in the city and its surrounding region in the first half of 2012, corresponding to a share of over 22% of the total number of units transacted. Stuttgart and Hamburg follow with a share of 6.2% and 3.5% respectively.

Matthias Pink, head of research at Savills Germany, said: “We are seeing a growing investor interest in the residential property market in Germany with domestic buyers continuing to dominate the sector.

“We have seen a very strong half year in this sector and while we expect activity to continue into the second half of the year, we do not expect it match the same levels.”

jwallace@costar.co.uk

About CoStar News

Finance Editor, CoStar News
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