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Union Investment to buy 16,000 German apartments from Chinese firm: sources

FRANKFURT (Reuters) - German fund manager Union Investment is nearing a deal to buy about 16,000 German flats for roughly 2 billion euros ($2.3 billion) from a Chinese investor, people close to the matter told Reuters.

BGP and Union Investment confirmed the deal but declined to give financial details. The deal would be the first in Germany’s buoyant property market in which a fund manager has made such a large acquisition.

The transaction will involve Union buying BGP, which owns the properties, with a view to offering the real estate to retail investors, the sources said.

The portfolio of apartments is being sold by Morgan Stanley Real Estate Investing (MSREF), whose main investor is China’s sovereign wealth fund CIC.

Union Investment plans to merge BGP with its own property platform and eventually transfer the BGP properties to its investment funds, the sources added.

Union Investment and BGP said in a statement that the acquisition is expected to close in the first half of 2019.

Morgan Stanley declined to comment, while CIC had no immediate comment.

With the deal, Union Investment and its partner ZBI Zentral Boden Immobilien Gruppe - 49.9 percent owned by Union Investment - plan to strengthen their joint residential real estate fund platform and increase the volume of managed funds, the fund manager said.

BGP’s acquisition of the apartments in 2016 had been the first major Chinese investment in German homes. Chinese real estate investors then became a regular sight in many German cities, according to real estate agents.

BGP was formed in 2005 as a joint venture between Australian investment group Babcock & Brown and property group GPT and at one stage was worth 4 billion euros.

Babcock & Brown was liquidated in 2009 and GPT shareholders received shares in BGP. These securities were held mainly by funds and 58,000 primarily Australian retail investors.

For decades, Germans enjoyed comparably cheap housing. But ultra-low interest rates, foreign investment and a failure to build enough flats to keep pace with an influx of people to big cities have pushed up house prices and rents in recent years.

German home prices have risen by 60 percent since 2010, according to Fitch Ratings. That has prompted German Chancellor Angela Merkel’s government to set out a raft of measures to try to speed up the construction of housing and limit rent rises.

Banking on a prolonged boom of the German property market, Union Investment hopes its planned real estate funds will meet abundant demand.

Half of BGP’s apartments are located in Berlin with the rest mainly in cities such Cologne, Duesseldorf, Muenster and Kiel.

In a separate deal, Germany’s second-largest housing group Deutsche Wohnen is planning to buy a portfolio of 2,800 apartments in Cologne, Duesseldorf and Frankfurt for roughly 750 million euros from investor Akelius, two people familiar with that deal said.

Deutsche Wohnen declined to comment, while Akelius was not immediately available for comment.

Reporting by Arno Schuetze,; Editing by Tassilo Hummel and Elaine Hardcastle