The largest residential deal in Germany for many months was announced yesterday when Vonovia, the country’s largest real estate group, agreed to sell a minority stake in its Südewo portfolio to Apollo Global Management, the private equity firm, for €1 billion.
Apollo will acquire around 30% of the portfolio of 21,000 homes in the southwestern German state of Baden-Württemberg at a discount of 5% to its valuation at the end of last year. The Südewo portfolio is currently valued at €3.3 billion.
“We are pleased to have these word-class, long-term insurance and institutional partners for our Südewo portfolio”, said Rolf Buch, CEO, Vonivia. “The transaction demonstrates the attractiveness of German residential rental income in general and of our portfolio in particular. It is also a significant step in reaching our full-year disposal targets”.
Vonovia will continue to manage the 21,000 residential units and has agreed a long-term buy-back option with Apollo with no obligation to exercise the call option. The German group had earmarked assets worth €13 billion to sell in order to secure access to capital during the current crisis and increase its free cash flow.
Apollo’s insurance and institutional clients will have access to a portfolio of long-dated, high quality assets. The residential units have been generating strong cash flows and performance to date.
“We are pleased to private a long-term cost-effective capital solution to one of Europe’s leading real estate companies”, said Jamshid Ehsani, Partner, Apollo. “This transaction will help Vonovia execute on its strategy through a highly attractive investment”.
The Vonovia investment is subject to the satisfaction of closing conditions and expected to be completed in the second quarter of 2023.
The transaction could revitalize the German real estate market, which has been struggling recently with transactions coming to a halt due to macro-economic headwinds and uncertainty over valuations.