GSW carries out EUR 183m bond issue for new acquisitions

GSW Immobilien has carried out a EUR 182.9 mln convertible bond issue to fund new acquisitions. The German listed residential property company said this week it is in advanced talks to buy 3,000 apartments in Berlin, just weeks after it purchased 4,400 Berlin homes for EUR 200 mln.

The convertible bonds were offered through a private placement with institutional investors and are convertible into 5.1 million new ordinary shares. The annual coupon rate was set at 2.0% and the initial conversion premium was fixed at 22.5% above the reference price of EUR 29.5 by means of an accelerated bookbuilding process. The initial conversion price thus amounts to EUR 36.20.

Deutsche Bank and Société Générale Corporate & Investment Banking acted as joint bookrunners and joint lead managers for the transaction.

GSW’s CFO Andreas Segal commented: ‘Active financial management is becoming increasingly important in order to keep the borrowing costs to a minimum and at the same time to ensure a high level of flexibility for the financing of new investments. Alternative financing instruments such as convertible bonds therefore help GSW Immobilien AG to raise liquidity and optimise borrowing costs.’ (Source)

GSW Nine-Month FFO Rises on Berlin Rent Income Increase

GSW Immobilien AG (GIB), Germany’s third- largest residential landlord by market value, said funds from operations increased during the first nine months on rising rental income.

FFO excluding divestments, a measure of a property company’s ability to generate cash, climbed 24 percent to 50 million euros ($64 million), the Berlin-based company said in a statement today.

GSW, which only operates in Berlin, is benefiting from rising demand for homes in the capital. Apartment rents have gained about 8 percent in the past year and 26 percent in five years, according to Berlin-based online broker ImmobilienScout24.

“The situation on the Berlin housing market remains positive and stable,” the company said in the statement. “We are therefore confident of reaching the targets set for the 2012 financial year.”

Third-quarter net income dropped to 15.6 million euros, or 31 cents a share, from a restated 17 million euros, or 41 cents, a year earlier, GSW said. The decline was mainly due to an 81 percent drop in interest income after a derivative sale boosted the year-earlier figure. Net rental income increased 26 percent to 42 million euros.

GSW fell as much as 2.2 percent to 29.58 euros in Frankfurt trading, the lowest intraday price since Oct. 4, and traded at 29.61 euros at 9:28 a.m. The shares have gained about 35 percent this year, while the FTSE EPRA/NAREIT’s index of German real estate has climbed 30 percent.

Acquisition Target

GSW is close to buying 3,000 apartments in Berlin, according to a separate statement, The company owns 52,000 homes in the city valued at about 2.9 billion euros and agreed to acquire an additional 4,400 in October.

To help pay for the acquisitions, GSW will sell convertible bonds valued at about 185 million euros, the company said. The bonds will mature in November 2019. GSW raised 202 million euros in a share sale in April.

The company repeated that 2012 FFO excluding sales will be between 61 million to 64 million euros.


Google pledges €1M to Berlin startub hub The Factory

Google is the latest to jump on board with new Berlin tech hub The Factory. The company has pledged €1 million ($1.27M) over three years through its “Google for Entrepreneurs” program.

The yet-to-be-completed Factory is a 12,000 square meter property development in central Berlin, which aims to bring established companies and new startups together in a unique (to Berlin) work-play environment. Confirmed tenants include Berliners SoundCloud, 6Wunderkinder, Versus IO and Toast, as well as global web non-profit Mozilla.

The funds Google has pledged will be allocated through The Factory and are earmarked for training, mentoring, events, and other programs to support startup development.

The Factory is backed by JMES Investments, an investor in several Berlin startups, in partnership with s+p Real Estate.

“Compared to London, we’ll still in kindergarten in Berlin.”

In terms of contacts, reputation, and funds, Google’s support is a significant boost in The Factory’s bid to help local startups grow to compete internationally. “Compared to London, we’ll still in kindergarten in Berlin,” JMES partner Simon Schafer said today, pointing to the tendency for Berlin Internet companies to exit at lower valuations to those in London. “We’re just at the beginning of the innovation process.”

He added that Berlin companies are also less likely to be in it for the money than some of their international peers.

For Google, the deal is more about goodwill than a direct bid to capitalize on talent in Berlin. The Factory will be enforcing a “no recruitment” policy on campus, and Google will not be directly investing in startups supported by its funds.

While Google’s pledge to The Factory is far behind its commitment to Google Campus in London, it’s a sign of growing interest in Berlin. Other recent Google initiatives for German startups include Grunder Garage in partnership with Indiegogo.

Additional reporting by Michelle Kuepper.

A version of this story appeared today on VentureVillage, VentureBeat’s Europe-based syndication partner.

Europe Rising property prices in Germany spark fears of a bubble

First, America’s real estate bubble popped. Then came Ireland’s, then Spain’s. All that escaping air may have been flowing into Germany, where economists are now warning that the first signs of a property bubble may be starting to appear.

German property prices have been zooming upward in recent years, as international investors pull their money out of struggling countries such as Greece and Spain and move it into Europe’s biggest economy in a desperate search for stability. If further price rises are followed by a crash, Germany, which has footed much of the bill for its neighbors’ bailouts, may enter a rough patch of its own, analysts say.

Bubbles are notoriously difficult to diagnose as they happen, and not all economists agree that Germany is entering one. But danger signs are there, many say. With rock-bottom interest rates, low unemployment and new money flowing in from foreign investors, many analysts say, Germany may experience an unpleasant pop in just a few years if prices keep rising.

The consequences could be wide-reaching, since significant portions of the 17-nation euro zone’s crisis response plans depend on Germany’s continued good economic health. If the country’s finances were to slip or if German voters felt themselves more vulnerable, Germany’s economic ability and political will to foot the cost of the bailouts may fade, analysts say.

“If we learn from the U.S. experience, we should be cautious, even if we up to now aren’t in a bubble,” said Kai Carstensen, an economist at the Ifo Institute in Munich. “When I talk to politicians, they always say, well, it’s different. That’s what you always hear; this time is different.”

“We are shielded against a bubble better than the U.S. or Ireland,” Carstensen added. “But it’s not impossible.”

Germany’s central bank has declared itself on guard against prices that rose about 5.5 percent last year nationwide.

That rate is “something that we will need to watch,” said German Bundesbank President Jens Weidmann in March.

Prices since then have only gone up. In fashionable Berlin, some analysts say prices have spiked 20 percent in the last year, though others say the rises have been more modest. Brokers say that much of the interest has come from foreign buyers seeking to protect their money from Europe’s turmoil by investing it inside what have been the euro zone’s safest borders.

Germans themselves are also more interested than ever in buying property. Only 43.2 percent of Germans own their own homes, according to government statistics. But unemployment rates are the lowest in decades, and low interest rates are making it cheap to take out home loans and unattractive to park cash in savings accounts.

Germany’s central bank reported in June that construction permits for new housing were up 9 percent between the period from September 2011 to March 2012 and the same span a year earlier. Much of the growth has been in apartment buildings, an indicator of investment activity, not just in the purchase of homes by buyers who intend to live in them, the bank said.

The distinction is important because it can determine how the economy would be affected by a sudden drop in prices. Homeowners who make a large down payment — in Germany, 20 percent or more of the purchase price is common — and live in the home they purchased can often ride out a downturn. Profit-driven purchases for investment, financed by heavy borrowing, may have tougher consequences for the overall economy should a bubble burst, economists say. But they also say they have not seen indications of major borrowing-driven purchases in Germany.

Much of the investment is being paid for in cash, and the rises are coming at the end of a long period of stagnation, economists say. Prices are about 20 percent higher than they were at Germany’s reunification in 1990, they say, not a cause for alarm. And the market’s upward direction is also powering growth in Germany’s economy more broadly. It is slated to grow about 1 percent this year.

“The price increases in the last years are very well supported by fundamental data,” said Thorsten Lange, a real estate analyst at DZ Bank, who said it was unlikely that Germany was heading into a bubble. “You need a longer term of stronger price growth” for that to happen, he said.

Nor does the froth appear to be building on itself.

“If you define a bubble as, ‘the price is only high because investors believe that prices are going to be higher in the next year,’ then you have no bubble in Germany,” said Ulrich Kater, the chief economist at DekaBank.

But in cities such as Berlin — long known as an unusually inexpensive European capital — anxiety about future housing costs is palpable among long-time residents. Protests against gentrification and price hikes seem to happen every other weekend.

Among real estate agents, a robust market brings only good cheer.

“We’ve noticed a lot more interest from people abroad buying apartments in Berlin,” said Anne Riney, the head of the Berlin-Mitte office of Engel & Voelkers, a real estate firm. The Mitte district of Berlin has seen some of the fastest price hikes.

“People have lost trust in banks, they’re afraid of inflation, they’ve never had this kind of economic crisis before, so they don’t know what to expect,” she said. “They’re putting their hard-earned savings into something solid.”