KKR buys €1bn German resi portfolio from Adler Group

Germany’s Adler Group has signed an agreement with New York-listed investor KKR for the sale of around 14,400 residential and commercial units, mostly in medium-sized cities in eastern Germany.

The purchase price is based on a portfolio valuation at €1.05 billion. Adler said that this represents a premium to the book value, as of 30 September 2021, which was independently verified by CBRE.

Net proceeds from the sale are expected to be about €600 million which Adler Group will use to reduce its debt with the aim of achieving an LTV of less than 50%.

The group is pursuing a strategy of increasing the company’s value by accelerating the reduction in debt levels and increasing its focus on residential property in major German cities.

Deal follows hot on the heels of sale to LEG Immobilien

Adler’s deal with KKR, in addition to a transaction with LEG Immobilien closed earlier this month, completes the process of selling existing real estate that does not conform to the group’s strategy.

Adler Group sold around 15,500 units to a subsidiary of LEG Immobilien. These comprised 15,362 residential and 185 commercial units, for which net proceeds of around €800 million were received.

KKR has bought the latest portfolio on behalf of Real Estate Partners Europe II (REPE II) and other managed funds. Following its acquisition, KKR said that its residential property and asset management company Velero will manage the portfolio, which includes assets in Leipzig, Halle, Erfurt, Jena, Dresden and Chemnitz, as well as other cities in eastern Germany, the greater Berlin area and North Rhine-Westphalia.

The deal brings its managed portfolio to more than 23,000 residential units, making it one of the largest privately-held residential real estate companies in Germany in terms of numbers of units.

Sascha Giest and Thomas Lange, co-CEOs and founders of Velero, said the acquisition of the portfolio “will enable us to leverage economies of scale in property management – all while ensuring a smooth transition and high-quality services to our tenants.”

As part of the deal, Velero will take on the 170 Adler employees that work on the portfolio.