Vonovia (VNAn.DE) has agreed to sell a part of its Suedewo residential portfolio to U.S. investor Apollo for 1 billion euros ($1.10 billion), Germany’s biggest real estate group said Thursday.
The deal could be a big deal for the failing German real estate market. In recent months, there haven’t been many big sales because of high interest rates and falling home prices.
The deal values the Suedewo portfolio in the southwestern state of Baden-Wuerttemberg at 3.3 billion euros, which is less than 5% less than Suedewo’s fair value as of December 31, Vonovia said.
The German group will continue to handle the portfolio of more than 21,000 residential units. It has agreed to a long-term buy-back option without being required to do so, with an internal rate of return (IRR) of 6.95%-8.30%, including dividends.
With the money, Vonovia will be able to reach about half of its goal of 2 billion euros in free cash flow.
“Not the big bang, and it was sold for 5% less than what it was worth recently, but it should be seen as a first step in the right direction,” said a local trader after the news.
At 7:33 GMT, Vonovia’s stock went up 2.6%, making it the most valuable stock in Germany’s blue chip index (.GDAXI).
In order to get money during the property market collapse, the group set aside 13 billion euros worth of properties to sell in the summer.
($1 = 0.9108 euros)