Equity Residential and AvalonBay Communities Inc. (AVB), the largest publicly traded U.S. apartment owners, are in talks to sell a German unit to a Deutsche Bank AG (DBK) fund, three people with knowledge of the matter said. The unit is valued at about 1.3 billion euros ($1.8 billion).
Deutsche Bank Asset & Wealth Management has created a fund for German pension funds and insurers to purchase DeWAG Management GmbH, said the people, who asked not to be named because the talks are private. An agreement will probably be reached this year, they said.
A spokesman for Equity Residential, founded by billionaire Sam Zell, wasn’t available to comment. Representatives of AvalonBay, DeWAG and Deutsche Bank declined to comment.
The U.S. companies acquired Stuttgart, Germany-based DeWAG as part of their purchase of Archstone Inc. from Lehman Brothers Holdings Inc. a year ago. DeWAG owns 14,500 homes in German cities including Cologne, Munich and Frankfurt, according to its website.
Equity Residential, based in Chicago, and AvalonBay of Arlington, Virginia, in November 2012 said they would sell some assets after the $6.5 billion Archstone acquisition. In January, Equity Residential agreed to sell 27 U.S. properties to Goldman Sachs Group Inc. (GS) and Greystar Real Estate Partners LLC for as much as $1.5 billion.
While DeWAG mostly manages homes, it’s also a developer. The company is held in a fund that’s 16 percent owned by Archstone, with investors such as insurers and pension funds holding the rest, according to DeWAG’s website.
U.S. firms including Blackstone Group LP and Goldman Sachs are selling German homes to take advantage as increasing demand boosts values. Archstone bought DeWAG for about $649 million in 2006 when the German company owned 6,100 apartments.
German home prices rose 4.9 percent in the third quarter from a year earlier as more investors and individuals bought apartments to take advantage of low interest rates, according to data compiled by the VDP Association of German Pfandbrief Banks. That’s the most in 10 years.
Morgan Stanley (MS) is managing the sale of DeWAG, which has a value of about 1.3 billion euros, four people with knowledge of the matter said in August.
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