GPT Group is edging closer to finally exiting its disastrous foray into global property as the company it spun off in the depths of the global financial crisis, German apartment owner BGP, has entered exclusive talks to sell its €1.1 billion ($1.62bn) portfolio to Austrian property company Conwert Immobilien Invest.
The move is likely to see Conwert buy BGP’s empire of about 16,500 apartments and funds finally returned to about 58,000 small investors that were left holding BGP units when GPT split off its then toxic European property holdings in 2009.
The sale will also clear the decks for incoming GPT chief executive Bob Johnston, who is due to start at the $7bn diversified property group by late January 2016.
A sale will provide a small fillip to GPT’s balance sheet, which has a 5 per cent stake in BGP, recovering a portion of the losses it suffered on the apartment buildings that first drew it offshore with failed investment bank Babcock & Brown.
Stockland, which owns more than 10 per cent of the European company, as it received BGP units due the strategic stake it built up in GPT when then Stockland chief executive Matthew Quinn had designs on merging the property giants, will also benefit.
BGP’s portfolio peaked at nearly €4bn of assets during the boom but had shrunk back to €2.3bn by 2009 and the business was dramatically restructured under managing director Mark Dunstan, who declined to comment yesterday.
The Australian revealed last month that the ongoing Greek debt crisis and unstable European sharemarkets may prompt BGP to scrap a planned stockmarket listing and opt for a trade sale of its €1.1bn apartment portfolio.
BGP chairman Rod McGeoch said market volatility had shifted the group’s thinking about a potential listing in Europe. The company had tentatively identified September as the next window for an IPO. However, European institutions have been buying up apartment portfolios directly as the sector consolidates.
In April, Conwert itself fended off a €980m offer for its portfolio of 30,000 German and Austrian units from rival Deutsche Wohnen.
Mr McGeoch emphasised BGP’s desire to only sell the portfolio for more than its net asset value of about €700m and 58 trade buyers signed nondisclosure agreements to look at the apartments.
Conwert said it was “currently conducting a comprehensive due diligence review of the relevant assets. Conwert has not until now entered into any binding agreements concerning the potential acquisition of the relevant assets and the outcome of the related discussions is completely open”.
The Australian last year revealed that BGP had tapped boutique house Lazard to advise on its options and Credit Suisse and JPMorgan were subsequently appointed to worked on a potential float. French group BNP Paribas and Germany’s Berenberg Bank were also providing assistance on the float that was expected to raise €300m- €500m.
The steadying of European property markets over the last two years and exceptionally low global bond rates have helped large parcels of residential real estate assets in Germany trade at substantial premiums.
BGP’s original property portfolio spanned Europe, with properties ranging from shopping centres in Spain and real estate in Sweden, Holland, France, Lithuania and Germany.
This article first appeared in The Australian Business Review.