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KWG Kommunale Wohnen AG signs Term Sheet for an acquisition of approx. 2,900 units

07-17-2012 07:58 PM CET | Industry, Real Estate & Construction

Press release from: KWG Kommunale Wohnen AG

- Largest acquisition in KWG's history expected
- Acquisition planned at 9.5x annual current Net Cold Rent
- Expected FFO-contribution for 2013e of approx. EUR 1.7 mn, expected to increase mid-term to more than EUR 3.0 mn
- Total portfolio of KWG Group increases to almost 10,000 units

Hamburg - 11 July 2012 - KWG Kommunale Wohnen AG, long-term oriented holder and operator of German residential real estate, accelerates its profitable growth. KWG signed a Term Sheet concerning the financing of the acquisition of 2,910 units with a lettable space of approx. 203,000 square metres. The Term Sheet addresses all material framework requirements of the long-term transaction's financing and guarantees KWG exclusivity for the negotiation of the Sale and Purchase Agreement and Due Diligence. The Signing of the final agreements is expected for Q3 2012.

The units are situated in attractive locations in Berlin (609 units) and North Rhine Westphalia (2,301 units), i.a. in Bochum, Duesseldorf and Wuppertal. Through the transaction KWG will expand its portfolio in line with its strategy in locations where it is already represented, thus raising significant synergies. KWG expects an FFO-contribution from the consolidation of the portfolio to be acquired of EUR 1.7 mn as early as 2013e, which will increase to more than EUR 3.0 mn in the following years through the reduction of vacancies, renovations and adoptions of rent to market rates. KWG expects to increase its NAV/share by approx. EUR 1.00 at the initial consolidation of the portfolio.

The portfolio can be acquired at a purchase price of EUR 93 mn. The purchase price implies only a 9.5x multiple on current annual Net Cold Rent. The purchase price per square metre amounts to approx. EUR 460.00 and thus lies significantly below market rates.

The portfolio consists of properties situated mostly in inner-city locations that have been built to traditional standards. Added potential can be derived from a reduction of the current vacancy amounting to 23 per cent. KWG is convinced to be able to decrease vacancy levels over the years going forward by implementing quality improvements. There is also upside on the rent potential as currently units are let at prices approx. 10 per cent below applicable market rates.

The financing of the purchase price and capex expenditures has already been structured. KWG will contribute the equity component from funds raised through the cash capital increase conducted earlier this year and the releveraging of a subsidiary. The debt component will be provided by a German Landesbank at attractive conditions. The financing bank has also committed to finance the required renovation and refurbishment measures.

Through the transaction KWG would grow into a new scale. The number of units in the group would rise to approx. 10,000, representing approximately twice the size of the portfolio as compared to 18 months ago. Annual Net Cold Rent grossed by KWG would amount to approx. EUR 33 mn. The highly profitable and attractively financed portfolio would contribute to KWG almost tripling its Funds From Operations (FFO) compared to KWG stand-alone with the FFO reaching more than EUR 5 mn in 2013e. Over the following years KWG expects the FFO to grow to more than EUR 8 mn. Thus, the acquisition would support KWG's ability to pay a sustainable dividend from its fiscal year 2013 onwards.

About KWG AG

KWG Kommunale Wohnen AG is a long-term oriented owner and operator of German residential real estate units. The company acquires residential real estate portfolios at attractive conditions in promising micro-locations of metropolitan regions and German regional centres and sustainably increases their value through an active real estate asset management. By refurbishments to high energy efficiency standards incidental costs for tenants are being lowered. KWG AG covers the complete value chain from acquisitions to construction management and its own internal property management. As a result vacancies are being reduced and income from net cold rent is being increased. This leads to value enhancements of the properties, above average Returns on Equity and profitability. KWG's shares are listed in the Entry Standard of the Frankfurt Stock Exchange.


KWG Kommunale Wohnen AG
Jan Hutterer
Alstertor 9
20095 Hamburg
Tel.: +49- 40- 2263088-100

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