Deutsche Annington’s €1.4bn acquisition of Vitus Group’s near 30,000-strong German multifamily portfolio is expected to trigger the repayment and refinancing of the inherited complex €1.35bn debt structure in time for the deal’s closure in the fourth quarter, CoStar News understands.
Vitus Immobilien, which is owned by an investor consortium comprised of Blackstone, Round Hill Capital and Aviva Investors and Deutsche Bank, has five tranches of debt which in aggregate amount to €1.35bn against a loan-to-value (LTV) approaching 90%.
In September 2012, Vitus refinanced the matured securitised and mezzanine debt with a fresh €754m senior loan, securitised by Deutsche Bank in a CMBS transaction called Florentia Limited, as well as two tranches of mezzanine loans and a tranche of debt held by Vitus to comply with EU’s ‘skin in the game’ regulations.
JP Morgan took a €565.5m vertical slice in Florentia while M&G Investments took a €100m mezzanine loan.
In addition, ranking super-senior to the Florentia CMBS loan is an additional tranche of €207m worth of low margin, long-dated German government subsidy loans.
Given how far credit spreads have tightened in the intervening 18 months, Deutsche Annington’s credit rating and customary 65% LTV leverage ceiling, the expectation is for an orderly refinancing in time for the deal’s closure in the fourth quarter of this year.
Deutsche Annington declined to comment on its refinancing strategy for the Vitus portfolio.
Such is the complexity of the capital structure of the deal, that while Deutsche Annington report the total consideration of €1.4bn, Vitus equally has valued the deal as effectively worth €1.5bn.
The Vitus portfolio consists of 29,859 residential and 330 commercial units, with approximately 90% of the units located within the metropolitan areas of Bremen, Kiel, Mönchengladbach and the Greater Düsseldorf area.
The 1.88m sq m stabilised portfolio generates an annualised net rental income of approximately €107m, has an average current tenant tenure of approximately 11.1 years and a current occupancy rate of approximately 95.5%.
Round Hill manages the investment vehicle which acquired the company in 2007.
Since acquisition, Round Hill has made a number of significant improvements to the Vitus portfolio, which has included centralising and consolidating the management of the entire portfolio into a single in-house management platform, increased EBITDA by over 20% and decreased vacancy on the portfolio by 30% while simultaneously increasing rent by an average of over 2.50% per year over the past three years.
In a statement issued this morning, Michael Bickford, founder and managing director of Round Hill, said: “Since acquiring Vitus in 2007, we significantly improved the quality of the underlying assets within the portfolio and restructured the entire operational platform for improved efficiency and performance.
“The envisaged integration of Vitus into the Deutsche Annington group is in line with our strategy to exit the portfolio, following a period of intense progress across the portfolio.”
Separately, Deutsche Annington has entered into a purchase agreement with respect to the acquisition of a portfolio of around 11,500 residential units managed by DeWAG for €970m.
Completion of the acquisition is planned for the second quarter of 2014. The combined two portfolios of about 41,500 residential units comprises floor area of more than 2.6m sq m.
Furthermore, the transactions increase Deutsche Annington’s presence in northern Germany with over 9,500 residential units in Bremen and about 9,250 residential units in Kiel. The vacancy rate of the combined portfolio is below 4%.