Deutsche Wohnen Inks €600M Deal, Forms Coronavirus Fund

Law360 (March 25, 2020, 3:11 PM EDT) -- German real estate giant Deutsche Wohnen AG said Wednesday it has agreed to buy most of private equity-backed peer Isaria Wohnbau AG for roughly €600 million ($649 million) and is launching a €30 million fund to provide coronavirus-related relief to commercial and residential tenants.

The transaction sees Deutsche Wohnen buying the project development platform of Munich-based Isaria, along with a number of major real estate projects, according to a statement. The deal stands to fortify Deutsche Wohnen’s portfolio of new projects. The company intends to ultimately invest more than €3 billion in the building of new residential, nursing and commercial properties across German metropolitan regions, although no further specifics, including a potential time frame, were disclosed.

The agreement with Isaria, which is backed by private equity firm Lone Star Funds, is subject to customary closing conditions and is expected to be completed before the start of next year. Isaria develops sustainable buildings and neighborhoods in cities. The company acquires land and then erects buildings, both for residential and commercial use.

Michael Zahn, CEO of Deutsche Wohnen, said in the press release that “with the help of this transaction, we now have access to attractive future projects, which we will realize systematically in line with our overall strategy.” 

“The lack of affordable housing in our cities is a major challenge for society,” Zahn said. “Up to 400,000 flats must be built every year in Germany’s cities. Private and financially sound companies can help to tackle this housing shortage.”

It was not clear which portions of Isaria are not included in the deal, and a representative for the company could not immediately be reached.

In the same news release announcing the deal with Isaria, Deutsche Wohnen revealed plans to launch a €30 million relief fund to “provide unbureaucratic help especially to commercial and residential tenants affected by the crisis and to tradespeople and small service providers.”

The company is planning to propose a reduction of this year’s dividend to 90 cents per share in order to finance the fund.

Zahn said the decision to form the relief fund came because Deutsche Wohnen is in strong enough financial shape to help during this time of crisis.

“We want to help tenants and longstanding business partners in areas where state support isn’t available,” he said. “This is our contribution to ensuring that economic crises don’t become social crises as well. We are confident that our shareholders will support this proposal and send out a clear message of support.” 

More information on the fund is expected to become available over the next few days.

A representative for Lone Star did not immediately respond to a request for comment.

Legal counsel information was not immediately available.

--Editing by John Campbell.

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