Luxembourg, June 21, 2016 – Deutsche Real Estate Funds (DREF) has issued its second bond in a private placement to fund the purchase and refurbishment of five student residences. The bond with a volume of 63.5 million euros has a seven-year term to maturity and bears interest at a rate of 4.5 per cent per annum. It is secured by senior registered land charges and subscribed to by large German institutional investors.
“We intend to at least double the size of our portfolio of student residential units by the end of the year and the proceeds from this issue will help us to achieve this objective,” said Felix Bauer, CEO and CSO of Deutsche Real Estate Funds Advisor. “The shortage of living space for students in Germany can only be reduced significantly with the aid of private investment. We are the only organization offering institutional investors access to this asset class. Our second bond provides further proof that capital markets can provide financing for German student accommodation.”
DREF placed its initial bond to finance student accommodation (ISIN: DE000A1ZW6U2) in June 2015. In the autumn of 2015, this bond was increased to 77 million euros at the request of a number of investors. Since the beginning of the year, the price has fluctuated between a range of 103 to 107 percent.
Halls of residence in Berlin, Halle, Ludwigsburg, Siegen and Stuttgart
DREF is using the issue proceeds to purchase and refurbish five residences comprising 1,100 units for students in Berlin, Halle, Ludwigsburg, Siegen and Stuttgart.
When selecting cities and properties, in addition to the location and the basic structure of halls of residence, DREF primarily assesses the university environment, as well as the housing situation in general and for students in the relevant city. To this end, DREF has developed a student accommodation price index in cooperation with the Cologne Institute for Economic Research (IW Köln). This was published for the first time to coincide with the 2016 summer semester and will be updated in the future ahead of each semester.
Additional private placement planned by the end of the year
At almost 4,000 portfolio units, DREF is the leading private owner and operator of student residential housing in Germany. DREF intends to increase its portfolio to more than 6,000 units by the end of the year. The property enterprise has already secured a further 1,500 units.
DREF also agreed a line of credit of 50 million euros from Chenavari Investment Managers at the beginning of the year to finance this growth. A further private placement is planned for 2016.
DREF establishes issuing platform
DREF has established an issuing platform under the administration of Hauck & Aufhäuser Alternative Investment Services, a subsidiary of Frankfurt-based private bank Hauck & Aufhäuser. Using this platform, DREF can structure future bonds specifically tailored to the requirements of investors. This makes DREF independent of other providers, thus providing efficient and rapid implementation of bond issues in the interest of investors. Beyond this, it is less complicated for investors to subscribe to DREF bonds. For example, investors are not required to open any additional securities or other accounts, and streamlined transaction handling can be guaranteed.
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