U.S. apartment real estate investment trust (REIT) – Equity Residential (EQR – Analyst Report) and AvalonBay Communities Inc. (AVB – Analyst Report) are said to be in discussions to vend a German unit, valued at €1.3 billion ($1.8 billion), to a fund of Deutsche Bank AG (DB – Analyst Report), according to a Bloomberg report. We believe that the sell off is for realizing good values amid rising home prices in Germany.
A fund created for German pension funds and insurers by Deutsche Bank Asset & Wealth Management would acquire DeWAG Management GmbH, according to the report. The parties are likely to pen a deal this year. However, no statement was issued from any of the parties.
DeWAG is a Germany-based real estate investor and asset manager. Its portfolio includes over 14,500 properties spread throughout Germany. Notably, DeWAG was acquired as Equity Residential and AvalonBay as part of the Archstone acquisition from Lehman Brothers Holdings Inc.
Yost Partners was up 0.8% for the first quarter, while the Yost Focused Long Funds lost 5% net. The firm's benchmark, the MSCI World Index, declined by 5.2%. The funds' returns outperformed their benchmark due to their tilt toward value, high exposures to energy and financials and a bias toward quality. In his first-quarter letter Read More
As a matter of fact, in 2006 Archstone acquired a significant share in DeWAG. Currently, DeWAG is held in a real estate fund in which Archstone retains a 16.46% stake while the rest is owned by European pension funds and insurance companies.
Home prices in Germany are fast rising. According to data published recently by the VDP Association of German Pfandbrief Banks, in the third quarter, German home prices escalated 4.9% from the earlier year, the highest in 10 years.
This is because a low interest rate in the country is driving the demand for apartment properties by both investors as well as individuals. In several cities demand is exceeding the rate of supply and home prices are moving north. We believe that the sale of properties in Germany is a strategic fit for Equity Residential and AvalonBay.
Currently, Equity Residential and AvalonBay have a Zacks Rank #3 (Hold). However, one better-ranked stock among apartment REITs is Independence Realty Trust, Inc. (IRT – Snapshot Report) which has a Zacks Rank #2 (Buy).