Deutsche Real Estate Funds (DREF) has purchased student residences in Berlin, Halle, Ludwigsburg and Siegen with almost 1,000 units. With a total portfolio of over 3,000 units, the real estate company now is the leading provider of student accommodation in Germany. A further 700 units already are secured under contracts and are to be finalized in the coming months.
DREF is investing 25 million euros in the purchase and refurbishment of these four student residences. Since June 2015, DREF has invested about 135 million euros in student housing in Germany. For comparison purposes: in 2014 the total transaction volume in Germany came to about 232 million euros.
Bond price rises to 103 percent
DREF has financed part of these investments via its bond, Deutscher Studenten Wohn Bond I S.A. – the first bond used to finance student housing in Germany. At the request of a number of investors, in November the company increased senior secured mortgage-backed with a coupon of 4.675 percent per annum and an investment grate rating to 77 million euros.
The bond price is currently at approx. 103 percent. In August it reached its high with 104.5 percent.
“This is a clear signal that we are on the right track. We’re the first provider to give institutional investors access to this form of real estate and infrastructure investments. Particularly against the backdrop of Solvency II, we can see that investor demand still is immense. For this reason, we plan to stage a further bond issue in the first half of 2016,” says Felix Bauer, CEO of Deutsche Real Estate Funds Advisor.
1,000 modern but affordable residential units in Berlin, Halle, Ludwigsburg and Siegen
The student residences in Halle, Ludwigsburg (metropolitan Stuttgart) and Siegen partly are fully refurbished residences and some are planned to be partly refurbished and modernized, particularly in the interior. In Berlin, DREF has purchased a new building that was originally used as a hotel and will now be converted into a student residence. Following the modernization work, 1,000 top-quality en- suite units in the medium price segment will be available in the four cities.
DREF proceeds in a very targeted fashion in selecting its locations and buildings. In addition to the location and building quality, in particular DREF evaluates the (international) reputation and development of the universities along with students’ living situation in the relevant cities.
In Siegen, for instance, the accommodation quota – i.e. the number of students that can be accommodated in residences – amounts to 7.1 percent. In contrast, on average throughout Germany, 11.3 percent of students live in residences. In recent years, Ludwigsburg has developed into a key location for tertiary education with as many as five universities. The supply of student accommodation could not keep pace with the fast-growing number of students. This is why numerous students need to commute. The city of Ludwigsburg has already identified this problem – its high quota of commuters means that it loses state payments.
In Halle, the main issue is to create modern living space. Not only does the city have a 500-year university tradition; in recent years a number of new and significant research institutions originated there, such as the Weinberg Campus, eastern Germany’s second-biggest technology park. To continue luring many good students to Halle – especially from abroad – the city needs a larger supply of modern and affordable accommodation.