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 €63.5m has a seven-year term to maturity and bears interest at a rate of 4.5%/year. 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 invstors 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 in June 2015. In the autumn of 2015, this bond was increased to €77m at the request of a number of investors. Since the beginning of the year, the price has fluctuated between 103 to 107%.
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.
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 €50m from Chenavari Investment Managers at the beginning of the year to finance this growth. A further private placement is planned for 2016.
