Berlin puts Eur 5m “for sale” sign on resi arm

An interesting article by Lucy Scott from PropertyWeek

Berlin puts Eur 5m “for sale” sign on resi arm

Berlin’s State government is to make the biggest disposal in the German residential sector for three years with the sale of Berliner Immobilien Holding.

The housing company, which has a price tag of €5bn (£4.5bn), owns 39,000 flats, 29 offices and 285 retail properties, as well as retirement homes and hospitals, and employs 469 staff.

The properties are divided among 29 closed-ended property funds that were taken over from Landesbank Berlin in 2007 and generate €390m (£354m) a year. The portfolio has an 8% vacancy rate and is mainly in Germany, but also in the UK, the US, the Netherlands and Sweden.

A sale at the asking price would be the biggest German residential transaction since 2005, when Guy Hands’ Terra Firma bought Viterra for €7bn (£6.3bn).

Berliner Immobilien has been put up for sale as Germany’s investment market continues to suffer from the global downturn. CB Richard Ellis reports that only €17.8bn (£19.6bn) of property was transacted in 2008.

However, a spokesman for Berlin finance minister Thilo Sarrazin said it was ‘confident’ of attracting bids.

‘There might be investors who find this interesting because of the economic conditions,’ said the spokesman.

‘The portfolio is financed and so is a unique opportunity for those with cash and it generates a calculable cash-flow, and there is potential to grow the rental income through asset management. There is a chance that we won’t get the price we are looking for, but if we don’t then we will try again when the market is better. We are not a forced seller.’

German residential’s low values and long-term, steady cashflows have attracted some of the world’s leading investors.

Last June, Goldman Sachs bought 93,000 flats from the state of North Rhine Westphalia for €3.4bn (£3.1bn), beating Deutsche Annington, Apollo Real Estate Advisors and Corestate Capital.

Ralph Winter, Corestate chairman, confirmed it was interested in Berliner Immobilien. He expects it to be bought by a consortium rather than a single buyer.

UBS is acting for the state.

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