Italy’s Pirelli Re and RREEF, Deutsche Bank’s real estate investment funds arm, have purchased the BauBeCon Group from US private equity group Cerberus. The €1.6 billion deal is funded by €350 million in equity and €1.37 billion in debt, of which €360 million is a non-recourse bridge loan and the balance collateralized real estate loans.
"There is a lot of hidden value if you wait for the recovery in the German market," says a Pirelli spokesman. "It looks like Italy at the end of the 1980s. We are different from opportunistic investors who are now exiting the market because they can’t do an IPO. These investors are selling portfolios to real estate players to get the internal rate of return they want."
Pirelli Re and RREEF will own the BauBeCon portfolio on a 40/60 basis, but the former will manage the property side of the transaction. RREEF is Pirelli Re’s partner for residential property investment in Germany as well as Italian retail business.
BauBeCon, which runs a portfolio of more than 27,000 residential units in Berlin, Hanover and Magdeburg, will be integrated into an asset management company. That company has not yet been set up but will eventually be branded with the Pirelli name. It will also encompass assets from the January acquisition of Deutsche Grundvermögen, one of Germany’s leading property companies, based in Hamburg and Kiel. As part of the agreement on this most recent deal, Pirelli will also acquire the platform that manages the properties.
With the BauBeCon acquisition, Pirelli’s assets under management in Germany have grown to more than €3 billion in book value and constitute 25% of its total assets under management. Eventually, when the portfolio is bigger, Pirelli might exit them through an initial public offering or a private placement.