Barclays Plc, the U.K.’s second-largest bank by assets, agreed to sell its German housing unit, Baubecon, to Deutsche Wohnen AG in a deal valued at 1.24 billion euros ($1.56 billion).
Deutsche Wohnen, Germany’s third-largest publicly traded residential landlord, agreed to buy Baubecon’s 23,500 apartments using an unspecified amount of cash and debt, according to a statement by the Frankfurt-based company yesterday.
The acquisition was an “attractive opportunity,” allowing Deutsche Wohnen to expand the number of units it owns by almost 50 percent and improve funds from operations, the company said in the statement.
Barclays, based in London, last week sold its remaining stake in BlackRock Inc., raising net proceeds of $5.5 billion. The sale allows Barclays Chief Executive Officer Robert Diamond to meet stricter capital rules and focus on more profitable operations.
Baubecon is a legacy of the buyout boom in German multi-family housing before the credit crisis hit in 2008. Prelios SpA and Deutsche Bank AG’s RREEF Real Estate acquired Baubecon for 1.67 billion euros in July 2007 in a deal 78 percent financed with a loan from Barclays.
The lender took over Baubecon late last year when Prelios and RREEF refused to inject more money after building-maintenance costs and a slide in values wiped out their investment. Barclays valued the company at 1 billion pounds ($1.57 billion) in its 2011 annual report.
GSW Immobilien AG also targeted Baubecon in a joint venture with Whitehall Street Real Estate fund, which is managed by Goldman Sachs Group Inc. The Deutsche Wohnen purchase will be completed in the next few months, according to the statement.
The acquisition adds 6,500 residential units to the real estate Deutsche Wohnen owns in the greater Berlin area, while it also gains 9,000 units in the central German cities of Braunschweig, Hanover and Magdeburg.
The purchase price is 13 times the net rental income of 95 million euros that the Baubecon properties generate annually. Deutsche Wohnen said debt won’t exceed 60 percent of the value of the real estate in the coming years.