The Vonovia-Apollo deal has had a significant impact on the real estate market. Germany's largest real estate group, Vonovia, sold a minority stake in its Suedewo residential portfolio to U.S. investor Apollo for 1 billion euros, thereby set a precedent in a struggling market. Vonovia's decision to retain management of the portfolio, coupled with a positive market reaction, has strengthened its financial position. The deal's valuation at a slight discount to fair value, generating proceeds for Vonovia, and the potential for reshaping the real estate landscape make this transaction noteworthy for both Vonovia and the broader market.
Earlier this month, Germany's biggest real estate company, Vonovia, announced that it has reached an agreement with U.S. investor Apollo to sell a portion of its Suedewo residential portfolio for 1 billion euros ($1.10 billion). This deal is significant as it may have a notable impact on the challenging German real estate market. Over the past few months, the market has experienced limited major sales due to high interest rates and declining property prices.
According to Vonovia, the sale of the Suedewo portfolio in Baden-Wuerttemberg, Germany, has been priced at 3.3 billion euros. This valuation represents a discount of less than 5% compared to the fair value of Suedewo as of December 31. Vonovia has also confirmed that it will retain the responsibility of managing the portfolio, which consists of over 21,000 residential units. Additionally, Vonovia has agreed to a long-term buy-back option, although there is no obligation to exercise it. The buy-back option offers an internal rate of return (IRR) ranging from 6.95% to 8.30%, which includes dividends received.
Vonovia plans to utilize the funds from the transaction to generate approximately half of their intended 2 billion euros in free cash flow through asset sales. A local trader remarked that while the sale was not a significant breakthrough and was executed at a 5% discount compared to recent fair value, it should still be seen as an initial move in the correct direction. As a result of this announcement, Vonovia's stock experienced a 2.6% increase at 0733 GMT, positioning it as the leading performer on Germany's blue-chip index.
In response to the property market crisis, the group has identified properties valued at 13 billion euros that will be set aside for sale, ensuring access to capital.
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