Germany’s ECE is buying Dandara’s portfolio of 2,063 build-to-rent flats for more than £400m, in a deal hailed as the largest acquisition of built rental housing stock in the UK.
The purchase of three schemes in Birmingham, Leeds and Manchester also marks the German private family office’s first foray in the UK build-to-rent sector, and its first operational assets.
It is backed by a combination of equity from ECE and its sole shareholder the Otto family, with debt finance from the PRS Housing Guarantee Scheme, managed by Venn Partners.
The portfolio will be acquired in phased stages over the next months, starting with the 324-flat scheme at Birmingham’s Aston Place at Arena Central (pictured), which it acquired last week.
This will be followed by two more sites: Leodis Square comprising 744 flats in Leeds, and 995 flats at Chapel Wharf in Manchester.
Henrie W Kötter, chief investment officer at ECE, told EG: “While many investors have been shying away from taking any material investment decisions in this sector in 2019 due to the lingering uncertainty around Brexit, we felt this to be a good time to invest given the underlying positive fundamentals.
“The portfolio offers the opportunity of a sizable entry into the UK market, providing a great starting point to eventually build an ECE platform.
“Birmingham, Manchester and Leeds benefit from a large share in the most relevant age bracket BTR appeals to, positive employment figures, and in consequence a remarkable demand for modern and professionally operated BTR apartments.”
ECE is headed by Alexander Otto. It has €32.3bn (£27.6bn) in assets under management in twelve countries, with a large focus on European shopping centres.
It has 2,900 apartments completed and in development in Germany. However, to date ECE has focused on development, selling schemes to long-term investors.
Kötter added: “Entering the market of operating residential real estate, such as BTR, will be a new business line which we start in the promising UK market, but plan to extend to other countries as well.
“We see the United Kingdom as an attractive, growing market in terms of both population and economic growth figures, with an ever-growing demand for modern built-to-suit residential real estate.
“Our goal is to further expand the residential portfolio in the UK and other European countries.”
The investor has entered into a three-year partnership agreement with the management platform Dandara Living, and will take on the long-term management and leasing of the apartments.
Simon Scott, JLL’s lead director of living capital markets, who is advising the buyer, said: “ECE’s commitment at this time recognised the rarity value of such a quality portfolio of scale and the fundamental supply demand dynamics in the UK rental market far outweighed any political uncertainty that was present at the time.”
ECE made its first purchase in the UK last summer, teaming up with Art-Invest Real Estate to develop a £190m luxury residential scheme on Cleveland Street in Fitzrovia, W1.
Earlier this year it invested a further €290m buying intu’s Asturias shopping centre, on behalf of its European Prime Shopping Centre Fund II.
Dandara appointed Rothschild to sell the portfolio of three schemes valued at £400m in 2018.
Rothschild delivered a shortlist of buyers, but lengthy due diligence on the built assets, combined with the developer’s preference to retain a role in the long-term management, meant that various bids for the portfolio collapsed.
At the start of 2019, US build-to-rent giant Cortland, advised by Savills, retracted its offer for the portfolio, despite lining up funding with Pension Insurance Corporation and an operational platform with the subsequent acquisition of LIV Group.
Underbidder LaSalle IM then stepped up to the plate, informally entering talks to double its UK BTR portfolio before deciding against the acquisition towards the end of last year.
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