Summer fun in the real estate sector is paving the way for an even more dramatic revival in activity later this year.
UK-based Duet Group, an alternatives firm, this week agreed to buy a 15.2% stake in Dutch real estate investment trust Nieuwe Steen Investments (NSI) It has struck the deal, worth €57 million, with bond holders in Tel Aviv-based estate group Habas Investments, which is being restructured.
If the deal goes ahead, Duet will buy NSI shares at their market price of €5.50, a 45% discount to net assets. It will end up with a stake in a €2 billion portfolio of yielding 8%, financed with €1.1 billion of debt costing 5.2%.
The Duet agreement has been confirmed in a Habas press release. Duet confirmed the details but declined to comment pending completion of the deal.
One boutique investment banker said the deal would not have looked so attractive a year ago: “Now, it seems to make a great deal of sense to take a view on secondary property yields.”
He added that the restructuring of indebted property companies like Habas has become significantly easier this year. Following lengthy discussions, this week creditors to German property company IVG, owed €3.2 billion, submitted a proposal for a debt-to-equity swap designed to put it back on an even keel.
The structuring joins a raft of summer property deals.
UK property company Redefine today confirmed it had bought three shopping centres in Germany valued at €189 million. The yield on the properties will be 5.5% stapled to debt totalling €141 million, costing 3.1% for its remaining 4.9-year term.
Investec is an adviser to Redefine. Investec real estate securities analyst Alan Carter said investors were finding it easier to access debt on competitive terms to buy secondary property: “You can get debt at 3.5% over Libor to fund property deals at 6.5% to 7%. Leases are being supported by a stronger economy and valuers, in places, are behind the curve.”
In June French property investor Fonciere des Regions said it expected to double its stake in a company that owns 32,000 German homes in a deal worth €1 billion. It confirmed the details this week, saying it expected to end up with between 58% and 62%.
Guy Hands raised €575 million in July by floating his German residential company Deutsche Annington on the stock market.
The sector is set for more activity as the year progresses.
Australian engineering group UGL is set spin off its estate agency arm DTZ. It bought the group for £77.5 million, in an opportunistic purchase, after it was placed in UK administration in December 2011. Since it bought the firm, the real estate market has improved significantly.
UK residential agent Foxtons is also set to file its intention to float at the end of this month, as house prices in the UK start to boom.
Goldman Sachs has won the race for investment bank fees so far this year, with $46 million in fees for clients in the real estate sector in Emea so far this year, or 12.4% of the market. Deutsche Bank is second with $25 million and JP Morgan third with $23 million.
