German student housing developer Deutsche Real Estate Funds, (DREF), has completed a promised increase in a bond it issued against its portfolio in the summer.
DREF increased the volume of the Deutscher Studenten Wohn Bond by €33 million, to €77m, via a private placement with German insurance companies, at a coupon of 4.675%.
Lutz Weiler, CEO of equinet Bank which acted as lead manager and bookrunner, said the bond was an additional way for German institutional investors to access the asset class. The increase was taken up by initial investors, including Barmenia Versicherungen and Versicherungskammer Bayern.
“Student accommodation is establishing itself as an asset class in this country”, he said. “Its stable and projectable cash flows have made student residences an attractive investment opportunity for insurers and pension funds.”
The secured bond is investment grade rated (BBB) by Creditreform, traded on the Frankfurt stock exchange and thought to be the only one for student housing – although the capital markets are tried and tested ground in Germany for multifamily property.
The proceeds will be used to buy and refurbish three properties, in Bochum, Essen and Kiel; the bond portfolio previously consisted of five assets in Berlin, Bremen, Kiel and Stuttgart.
DREF’s total portfolio now comprises 2,300 student residential units with three more schemes with 1,700 units in the pipeline. Additional acquisitions are likely to be financed early next year with another issue.
DREF had originally hoped to be able to include retail investors as well as institutional investors in the issue.
Internos Global Investors, the European investment manager run by Jos Short and Andrew Thornton which is making a push into “assets with beds” took a 27% stake in DREF in February, together with family office Somerston Capital.
Felix Bauer, CEO of Deutsche Real Estate Funds Advisor, said: “We’re delighted that we were able to reinforce our bond volume at the request of a number of investors and to achieve our targets set for this year. This goes to show that we can also finance student accommodation in Germany via the capital market”.
Petra Nithammer, portfolio manager at Barmenia Versicherungen, said that as an insurance company, “student accommodation is an ideal investment opportunity. It is an investment in German real estate with a reputation for stable value [and investment protection]. And, at the same time, the yields are higher than those generated by the regular housing market”.