German residential property developer Instone, formed last year by the Jersey-based ActivumSG from two subsidiaries, is likely to favour a stock market flotation this year to tap into investor enthusiasm over rental housing, say Business Immo Europe sources.
They were reacting to reports over a possible IPO of Instone Real Estate deriving from a company release late last year that quoted CEO Kruno Crepulja seeing significant opportunities to increase its €3.4bn project portfolio. "In order to increase our flexibility to accelerate our continued growth in the attractive German residential development market we are exploring together with our owner ActivumSG various strategic financing options," he said in November. "These options may include an IPO or a private placement of shares. However we are not under time pressure, nor do we feel in any way compelled to take any action.”
Informed BIE sources, who asked not to be named, said a process has been set in train investigating a stock market flotation for the company, which was formed only last summer out of two developers, Leipzig-based GRK and the Essen-based formart.
An IPO could take place as early as the first half of this year, the BIE sources said. "There is a process in place and it's clearly aiming for an IPO," one informed source said. Possible timing of a flotation and other details are currently being worked out with banks. "The target is for fairly early in the year; I would say probably in the first half," the source added.
The huge demand in Germany for housing, particularly for rent, has led to the creation in just a few years of several huge listed investor groups such as Vonovia, Deutsche Wohnen, LEG, TAG Immobilien and Grand City Properties - many of which either focus on or have branched out more recently into renovation and development. These have been joined more recently still by the Berlin-focused Ado Properties, and Luxembourg's Corestate Capital - looking mainly in niches such as student and micro-living. Added to the group is the smaller listed GXP, in which Munich's CG housing developer took a controlling stake late last year. Corestate earlier this month sourced a €670m forward residential project for a Bavarian fund management client from CG.
The demand overhang for German housing is put by experts at 400,000 to 500,000 units while annual supply hovers around 300,000, according to official statistics. Added to this, German new-build residential prices have been rising at a steady 7-10% p.a. in recent years, outstripping standing stock at 5-6%. As well, home-ownership has been rising in a nation that has one of the lowest ownership rates in Europe - around 52.5% of total dwellings compared to an average 67.6% in the Euro area, according to the Bundesbank. The combination of all factors has produced numerous new residential developers in the nation, but few as yet with stock market listings. "The residential development sector on the stock exchange is a bit like a unicorn right now," the BIE source said.
Instone is controlled by ActivumSG Capital Management, a company founded in 2007 by former Cerberus Europe executive Saul Goldstein to invest in niche opportunities in European real estate. Starting by renovating, re-positioning and selling off distressed properties, Goldstein has built the group into several areas including fund management and residential development. ActivumSG has to date raised four investment funds, and last week announced investor commitments of a further €489m for its newest vehicle ActivumSG Fund V. "International investors’ commitments support a strategy that pivots away from conventional property purchases to focus on building up corporate platforms and other indirect paths to gain exposure to attractive real estate market investment themes," ActivumSG said in a release accompanying the announcement.