Vonovia (VNAn.DE), Germany’s largest real estate business, announced Thursday that Apollo would buy a minority position in its Suedewo residential portfolio for 1 billion euros ($1.10 billion).
Due to rising interest rates and plummeting real estate values, few large transactions have happened in the German real estate market in recent months. The deal might signify a turnaround.
Vonovia said the acquisition valued Suedewo’s Baden-Wuerttemberg portfolio at 3.3 billion euros, a less than 5% reduction from its fair value as of December 31.
It claimed the German firm, which will continue to manage the portfolio of more than 21,000 residential units, has agreed to a long-term buy-back option without an obligation at an internal rate of return (IRR) of 6.95%-8.30%, including dividends.
Vonovia will earn half its 2 billion euro asset sale free cash flow with the proceeds.
“Not the big bang, and sold 5% below recent fair value, but should be viewed as a first step in the right direction,” a local dealer said after the news.
Vonovia topped Germany’s blue-chip index (.GDAXI) at 0733 GMT after rising 2.6%.
The firm sold 13 billion euros of assets in the summer to raise money during the property market crisis.
