U.S. apartment real estate investment trust (REIT) -
AvalonBay Communities Inc.
) 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
), 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
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.
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.
) which has a Zacks Rank #2 (Buy).
AVALONBAY CMMTY (AVB): Free Stock Analysis
DEUTSCHE BK AG (DB): Free Stock Analysis
EQUITY RESIDENT (EQR): Free Stock Analysis
INDEP REALTY TR (IRT): Free Stock Analysis
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