Vonovia SE's €5.2 billion deal to buy Austria-based BUWOG AG will give Europe's largest listed residential landlord a platform to develop much-needed new homes for the German market, CEO Rolf Buch said in a conference call presenting the deal.
The offer for Buwog, which is supported by its supervisory and management board, will add 49,000 apartments in Austria and Germany to Vonovia's portfolio of almost 350,000 homes across both markets. Beyond Buwog's operating residential assets, its reputation as a successful developer was a key driver behind the takeover.
"We will get a very attractive, probably the best-performing development platform in the German-speaking region – in Austria but also very important in Germany," said Buch. "This will help us to build more and to develop more. This has of course a positive financial impact but also keep in mind that this will help us on the political front massively because [German] politicians like to have new construction [as] this is a big issue in Germany."
Germany needs to build around 350,000 homes annually until 2020 to meet demand, according to a May 2017 German housing report by the European Commission. The country has only produced between 150,000 and 250,000 homes each year since 2005, data from the European Commission shows.
Buwog's portfolio is split between Austria and Germany, with around €2 billion of residential assets mostly in the German cities of Berlin, Hamburg and the Kiel-Lubeck region, while almost €1.9 billion of assets are based in Vienna and other smaller Austrian cities.
Vonovia expects the merged company to begin saving around €30 million per year by the end of 2019 through its value-added service, the application of its craftsman organization and its property asset management platform on Buwog's German assets, CFO Stefan Kirsten said.
"For us, one of the most important aspects is that it is a step into the development business where we have not assumed any synergies at the moment, but this is of course extending again Vonovia's reach," he added.
The deal allows Vonovia to retain its presence in Austria, which it entered when it bought Conwert for €1.8 billion in 2016. Vonovia was planning to sell off Conwert's Austria assets as they were "sub-critical," said Buch, but will now retain the properties as they can use Buwog's Austria platform to manage them.
"The window was closing a little bit because we were preparing the sales of the Austrian portfolio [from the Conwert takeover]. And if we had sold it, this transaction would not have made sense any more," said Buch.
"We will [now] achieve critical mass in Austria," he added. "We think we will extract much more money than we would have if we had sold [Conwert's Austrian assets] in a package."
The deal is the third major acquisition by a listed European landlord in two weeks. Hammerson announced Dec. 6 that it was buying rival U.K. retail landlord Intu Properties for £3.6 billion. French mall giant Unibail-Rodamco followed this up Dec. 12 with a $15.6 billion takeover of Australia-based Westfield.