Property Takeovers Going Through the Roof

Two high profile takeovers in Germany’s property market show that the sector remains one worth watching.
Change of ownership in the pipeline.

Berlin-based housing owner Deutsche Wohnen wanted to join in the flurry of takeover activity that has hit German real estate market. On Sunday, it offered just under €1 billion for Conwert, a Frankfurt and Vienna-listed property firm, which holds most of its portfolio in Germany.

Less than 24 hours later, another German-listed property manager, Hamburg-headquartered Adler Real Esate, offered €370 million for Berlin-based Westgrund with the aim of becoming the fifth-largest owner of residential properties.

The two deals follow the €3.9 billion takeover of Gagfah by Deutsche Annington announced in December and Deutsche Wohnen’s €1.7 billion acquisition of GSW in 2013. When the dust settles on the deals Deutsche Annington will become Germany’s largest owner of residential property, while Deutsche Wohnen will take the number two slot.

The market is attractive because one can build a portfolio. In Berlin, for instance, the ownership ratio is very low. Konstantin Lüttger, Head of residential investment at property advisor and manager CBRE

“Demand for German houses is incredibly strong," said Konstantin Lüttger, the Frankfurt-based head of residential investment at property advisor and manager CBRE, told Handelsblatt Global Edition. He said the German residential market is popular with a full range of investors, from national to international investors, private to institutional.

Buoyed by investor demand, LEG Immobilien and Deutsche Annington listed on the Frankfurt Stock Exchange in 2013. Deutsche Wohnen has been listed since 1999.

Helped by a record-low interest rate, a large rental market, a stable economy, and a rising population, Germany has seen a continued high level of investments in housing property. In 2014, €13.3 billion worth of transactions took place in the German residential market, close to the seven-year high reached in 2013.

“The market is attractive because one can build a portfolio. In Berlin, for instance, the ownership ratio is very low. Many homes are rented and it is possible to buy these rented apartments,” Mr. Lüttger said.

He added that rents could rise further in big cities such as Münich or Berlin if demand remained high and supply constraints to build new houses were kept in place, but it was not related to listed companies owning the homes.

“Last year, over 400,000 people moved to Germany on a net basis. Most of these went to metropolitan areas,” he said. “Germany is an attractive country in the European Union, law enforcement is reliable. But how immigrant flows will develop and where they go to is hard to predict.”

The property takeovers may not change the make up of the Frankfurt stock exchange, but they do show that companies are taking the opportunity to raise capital and expand operations, he said.

“It is a question of where growth is possible and how costs can be reduced. The market was fragmented,” Mr. Lüttger said.

Whether Deutsche Wohnen, which owns about 147,000 apartments and houses in Germany, will be successful in buying Conwert, which owns about 25,000 German residential properties, remains to be seen.

Some minority shareholders of Conwert said the offer price of €11.50 per share was too low.

Alexander Proschofsky, the director of one of Conwert's significant shareholders Cube Invest, thinks the offer value did not represent the fair value of the Austria-listed firm.

Conwert shares rose above the offer price on Monday, and traded at €12.04 on Tuesday at 0949 GMT on the Vienna Stock Exchange.

Deutsche Wohnen, which plans to issue shares later this year to fund the deal, does have an agreement with two of biggest shareholders to buy around 25 percent of Conwert shares, Deutsche Wohnen said in a statement. If the German firm can obtain 50 percent plus 1 share of all outstanding Conwert shares, it will push through with the offer, it said.

Adler's takeover of Westgrund, to create a combined portfolio of 52,000 German apartments and houses, is set to succeed. Westgrund shareholders who own more than 50 percent of the company have agreed to sell their shares to Adler. The purchase will be paid partially in cash and partially in Adler shares.


Gilbert Kreijger is an editor with Handelsblatt Global Edition in Berlin, covering companies and markets. Handelsblatt correspondents Reiner Reichel and Hans-Peter Siebenhaar contributed to this article. To contact the author:  [email protected]