The buildings, housing more than 1,000 apartments, are mainly in the Altbau architectural style, which was in vogue from the late-19th century up until the 1940s.
Sylvain Deschamps, debt fund manager at AEW, an affiliate of Natixis Investment Managers, said: “The buildings are rare because not many survived the war, and are very sought after by buyers looking for quality apartments in attractive districts of Berlin.”.
The buildings were financed with a €188m loan – for which Natixis Bank was the lead lender – with a margin of 210bps above Euribor. The loan-to-value was 53%.
“The deal has conservative risk metrics and the yield represents a good risk-adjusted return considering these are core German assets within a very granular portfolio,” noted Deschamps. The yield is relatively high because German banks, usually extremely competitive on their domestic market, are unwilling or unable to value each and every one of the 1,000 units, which is necessary to comply with Germany Pfandbrief rules. The absence of local bank funding considerably reduced competition for the portfolio.
The buildings were purchased by a Danish individual in 2010 at a price far below those paid for core residential real estate in other western European capitals at the time. They were then sold to Blackstone in 2017. Blackstone was to sell the units one-by-one to individuals as tenants moved out and apartments became vacant.
The remaining portfolio has now been purchased by PineBridge Benson Elliot, a specialist pan-European real estate fund manager, based in London. Natixis and AEW, together with other institutional investors, provided the financing to PineBridge. “The approach, which has proved its relevance, will not change,” said Deschamps. The aim is to sell the apartments as they become vacant. The turnover rate is around 5% a year.
Deschamps added: “From a lender perspective, the underlying collateral benefits from strong dynamics in the market, with prime Berlin residential prices rising by an average of more than 10% a year over the last 10 years. When we visited the properties, we could see they are really best-in-class.”
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