Benson Elliot Capital Management, the UK-based private equity real estate fund manager, has exchanged contracts with a number of subsidiaries of Speymill Deutsche Immobilien Company PLC (SDIC), to acquire the TOR residential portfolio on behalf of Benson Elliot Real Estate Partners III. The transaction involves the acquisition out of receivership of over 3,000 residential units and ancillary commercial units, in 80 properties in Germany. Debt funding for the transaction has been secured from Landesbank Berlin.
Trish Barrigan, Benson Elliot Senior Partner, said: “We’re at the beginning of a long, slow unwind of a period in which property portfolios were hurriedly assembled and aggressively financed. The TOR portfolio may be one of the first defaulted CMBS portfolio loans to be resolved – it certainly won’t be the last. These are complex transactions, requiring a breadth of property, financial structuring, tax and other skills. We wouldn’t have reached the finish line without a commitment from all parties – Ernst & Young, Hatfield Philips, Benson Elliot, Landesbank Berlin and our joint-venture partners Wertgrund Immobilien – to make it happen.”
The TOR portfolio assets are located in prime metropolitan areas, with three quarters of the properties situated in Berlin, Frankfurt, Munich, Hamburg, and Cologne. The largest concentration – over 60% of the portfolio – is situated in the capital, Berlin. The properties range from individual buildings to residential complexes, comprising a total area of just over 230,000 sqm. Portfolio occupancy at year-end 2011 was 91%.
Philipp Braschel, Benson Elliot Principal and Head of Investment in Germany, said: “Good quality residential properties in Berlin and other strong and growing German cities are among the most sought-after real estate assets in Europe today. Valuations remain well below new-build costs, there’s limited new construction and occupational demand is strong. Investors are being drawn to the sector’s stable cash flows and perceived inflation-hedging attributes. The TOR acquisition follows our 2010 acquisition of the 700-unit Silvertower residential portfolio in Berlin, where we’ve seen strong income and capital growth. We believe this most recent acquisition has similar growth potential, and look forward to applying our asset management skills in partnership with Wertgrund to unlock value for our investors.”
The TOR portfolio was assembled in 2006 by SDIC, the former AIM-listed residential holding company, through a series of acquisitions. The portfolio was subsequently debt financed through a CMBS loan (the TOR loan), part of the MESDAG (Charlie) B.V. issuance which closed in April 2007. The TOR loan, the largest loan in the securitisation, was transferred to special servicing in November 2010 following a loan payment default. The appointment of receivers over the shares of the borrowers and other SDIC subsidiaries followed shortly thereafter. The portfolio disposition, directed by special servicer Hatfield Philips International Limited and receiver Ernst & Young working in conjunction with the borrowers, represents one of the first enforced sales of a defaulted CMBS loan in Germany. The principal balance of the TOR loan was €187 million as at year-end 2011.
Benson Elliot was advised on the transaction by Olswang. The special servicer and receiver, Ernst & Young, were advised by Ashurst, Cains, In-West and Ernst & Young Real Estate.