FRANKFURT Real estate group Deutsche Annington ANNGn.DE will spend 2.4 billion euros ($3.3 billion) on German apartments to expand its presence in the north of the country, the company said on Friday.
The purchases follow several years of property consolidation in Germany as investors pile into assets with relatively strong and reliable income streams, such as property and infrastructure projects, rather than German sovereign bonds with meager yields.
Deutsche Annington said it had agreed in principle to take over 30,000 residential units held by Vitus, owned by Blackstone (BX.N) and private equity firm Round Hill Capital, for 1.4 billion euros.
It is also buying about 11,500 apartments managed by residential real estate firm DeWAG for about 970 million euros.
The deals, to be financed with debt and equity, will give Deutsche Annington a larger presence in the northern German cities of Bremen and Kiel and boost both operating profits and net asset value.
Last year, German property group Patrizia (P1ZGn.DE) spent 2.45 billion euros on 32,000 flats owned by BayernLB BAYLB.UL. Earlier this month, Austria's Immofinanz (IMFI.VI) agreed to buy 18,000 German homes for almost 900 million euros.
"The terms of the deal seem fairly reasonable... We are pleased that the upgrade of the existing portfolio will continue as scheduled, and with external growth more of an 'add-on'," Berenberg analysts said in a note.
The flats have an average vacancy rate of below 4 percent, compared with Deutsche Annington's group average of 3.5 percent in 2013.
Deutsche Annington will issue up to 16 million new shares to raise 250 million to 300 million euros in cash, launch a separate capital increase in exchange for assets, not cash, that will be worth 200 million euros and issue a hybrid bond.
It is taking on around 400 million euros of debt in the deals, Chief Executive Rolf Buch told journalists during a conference call on Friday.
Deutsche Annington said its net ratio of financial liabilities, or LTV-Ratio, will rise slightly to about 51 percent from 50 percent in the medium term following the transaction, and its gross asset value will grow to about 12.8 billion euros.
Deutsche Annington also published 2013 results, saying its operating profit rose 32 percent to 223.5 million euros, while its net asset value was up almost 40 percent at 4.78 billion.
(Reporting by Maria Sheahan; editing by Thomas Atkins and Tom Pfeiffer)