Germany's DEMIRE Deutsche Mittelstand Real Estate, controlled by US wealth manager Apollo and the domestic Wecken family, is raising €150m in a capital increase at 36:17 to fund €350m in targeted acquisitions.
The Luxembourg holding vehicle for Apollo, AEPF III 15 which holds 49.58% of DEMIRE equity, will subscribe fully to the increase, the firm said. It made no mention of theWecken Group, with 33.73%. The two firms earlier this year reorganised DEMIRE capial after the US firm's interest in extending its German CRE exposure and backing CEO/CFO Ralf Kind. The two shareholders in June converted a €10m bond into equity to raise their collective stakes from just under 30%.
The company said it intends to sell the new shares and use net proceeds in part to fund the acquisition of several properties and/or portfolios primarily in Germany worth an estimated €350m. It is in varying stages of preparation and exclusive negotiations with sellers and aims to enter into a sale and purchase agreement with respect to one of the portfolios in the near term.
Kind said in the release: "We are very pleased by the continued commitment of our anchor shareholder in implementing our DEMIRE 2.0 strategy. With the proceeds of the issue we intend to realise a first significant growth step of up to €350m. In addition, we have a strong acquisition pipeline that gives us the confidence to achieve our targeted portfolio goal of €2bn."
Should the company not be able to execute on any or all acquisitions, it will apply the proceeds in line with its financial strategy of selective acquisitions of commercial properties primarily in secondary locations in Germany. DEMIRE expects to finance the remaining amount of the purchase price for these acquisitions of up to €200m through further borrowing.
At the half year 2018, DEMIRE reported a surge of over 12x in attributable net profit to €39.5m and doubling of FFO 1 to €11.36m. Gross asset value of its owned properties increased slightly to €1.1bn from just over €1bn at the turn of the year.
The issue is subject to approval of the prospectus by the Federal Financial Supervisory Authority BaFin. The subscription period is expected to start on 30 October and end on 12 November, DEMIRE said in a release. No trading of subscription rights will take place.
For the rights issue Baader Bank is acting as sole global coordinator and bookrunner.