First Austrian benchmark bond helps fuel merger speculation

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Austrian listed property group Immofinanz bolstered its finances earlier this month when it placed €500m of fixed rate senior unsecured notes with a four year maturity and a 2.65% coupon. The net proceeds of the note issue will be used for the refinancing of existing debt and for general corporate purposes, the group said.

The bond earned a BBB rating from agency Standard & Poor’s, earning it the distinction of being the first-ever rated bond issue from an Austrian real estate company. S&P cited among the reasons for its rating decision “IMMOFINANZ’s market position as one of the largest commercial property owners in CEE region, the stable occupancy levels and the stable demand trends in the company’s operating environment.”

According to Immofinanz CFO Stefan Schönauer in a press statement, “This transaction represents an important milestone for Immofinanz in further diversifying the funding sources with an investment grade rated unsecured instrument, while the refinancing of existing debt will secure currently low interest rates and increase the hedging quota. The investment grade rating underlines the success of our consistent strategy implementation, which has resulted in a very solid financial profile and a sustainable improvement in profitability.”

The notes have a denomination of €100,000 and will be listed on the regulated market of the Luxembourg Stock Exchange. Immofinanz said an application will be made to introduce them for trading on the Third Market (MTF) of the Vienna Stock Exchange. Deutsche Bank, J.P. Morgan, Société Générale and UniCredit acted as Joint Bookrunners and Joint Lead Managers.

As a result of the newly-achieved investment grade rating, Immofinanz’s outstanding convertible bonds 2024 will undergo a step-down in coupon by 0.5pts to 1.5% p.a., already applicable for the next interest period, the firm said.

The initial announcement that Immofinanz would seek to place a benchmark bond already sparked speculation that the proceeds will help at least partially finance the takeover of smaller Vienna peer S Immo.

Last year the big Viennese listed companies Immofinanz and CA Immo cancelled plans for their long-mooted merger, with Immofinanz selling its stake in CA Immo to US private equity investor Starwood for $882m. At the time Immofinanz said it planned to use the proceeds to intensify its share buyback programme through the end of 2019, buying back up to 8.66% of the outstanding shares. It said it would have made a hefty profit of about €184m including dividends over the two year period it held the CA Immo shares.

After the disposal of its CA Immo stake, speculation in Vienna then centred on whether Immofinanz might use some of its cash pile to make an all-out takeover offer for the last remaining significant Austrian player, S Immo. Immofinanz has already committed to buying a 29% stake in S Immo, which in turn owns a 12% stake in Immofinanz. A merger between the two is still thought likely, and could occur early this year, say local Vienna sources.

Immofinanz’s real estate portfolio is valued at about €4.3bn, and covers more than 220 properties. It focuses on retail and office in seven core markets in Europe: Austria, Germany, Czech Republic, Slovakia, Hungary, Romania and Poland. Among its better-known brands are STOP SHOP (retail), VIVO! (retail) and myhive (office/co-working). The company is listed in Vienna and Warsaw.

Recent financing deals - roundup

Among the standout financings throughout January by the more prominent classical lenders were deals arranged by LBBW, pbb Deutsche Pfandbriefbank and Münchener Hypothekenbank.

Listed company Vonovia SE, Germany’s largest residential landlord, closed a deal with LBBW-Landesbank Baden Württemberg and pbb Deutsche Pfandbriefbank for a €500m 10-year loan for general business purposes. The two banks are lending the money in equal amounts. The loan is secured by a residential portfolio in Dresden with a total lettable area of around 800,000 sqm, consisting of 13,400 residential and over 200 commercial units – nearly all of which is let.

Vonovia’s Thorsten Arsan, head of corporate finance, gave few details but said the financing arrangement was secured on attractive terms. “The deal demonstrates the benefits of our financing strategy, which relies on a balanced mix of unsecured and secured instruments."

Gerhard Meitinger, pbb Head of Real Estate Financing Germany, said: “This successful transaction is the result of good cooperation with LBBW and Vonovia, which shows how large-sized financings can be provided." Added Dieter Hildebrand, LBBW Head of Real Estate Clients Germany: "Working together as partners leads to excellent results for large-sized transactions in the interests of the client."

Pbb Deutsche Pfandbriefbank was also instrumental in a French refinancing when it committed to a €103.8m refinancing of assets owned by London-headquartered logistics investor Valor Real Estate Partners.

Valor said the refinancing is for recently-acquired French assets held within its fund Valor Industrial Partners 1. The funding is secured against seven last-mile logistics assets across the nation, including five in prime Paris locations and two in Lyon. The combined portfolio totals 170,000 sqm in size. The largest investment is in Le Bourget, the site for the 2024 Paris Olympics, and comprises 11 fully let units and a 30,000 sqm development site.

The facility with pbb represents day 1 leverage of 65% LTV with a capex facility to complete the works at Le Bourget.

Pbb Deutsche Pfandbrief’s Norbert Müller, head of financing for western Europe, said: “We are pleased to deepen our relations with Valor with this first financing in France after the previous financing in the UK last year. This is a further example of an investor seeking to add value through long term asset management.”

The Munich bank also lent €59m to the EPISO 4 fund, managed by long-term client Tristan Capital Partners and its operating and equity partner White Star Real Estate, to buy a logistics portfolio with assets in five Polish cities. The properties – in Gdansk, Poznan, Wroclaw, Czeladz and Grodzisk – are all modern logistics centres with high ceilings, loading dock ratio and floor capacity, and are nearly fully let to a mix of international and national tenants.

Meanwhile fellow Munich property financier Münchener Hyp is providing a long-term loan of “several hundred million euros” as sole underwriter to GEG German Estate Group to finance the acquisition of the Garden Tower in Frankfurt’s central business district. It is the first financing deal between the two groups.

One of the most prominent buildings in the city, the 127-m Garden Tower has more than 27,000 sqm of office space under long-term leases to a total of 17 tenants.

Münchener Hyp’s Christian Winges, regional director in Frankfurt, said: “Our ability to deliver in terms of processing speed, underwriting capacity and reliability throughout the entire processing phase was the decisive factor that enabled us to cement this new partnership.” GEG’s chairman Ulrich Höller commented: “Financing the Garden Tower through MünchenerHyp allows us to further diversify our funding base. MünchenerHyp won us over in this regard with its competitive offer and very professional processing.”

Münchener Hyp also financed the purchase of the Helix office building in Eschborn, just outside Frankfurt. It served as underwriter and sole lender for a €74.3m loan to the buyer, Hana Financial Investments from South Korea.

The Helix office building has more than 36,000 sqm of office space and is completely let to Commerzbank AG for 15 years in a sale and lease-back transaction.