Fortress adds €370m of flats to German residential platform

Fortress has delivered on its promise to grow its German residential portfolio, Gagfah, by announcing four separate acquisitions totaling €370 million ($487 million)

Before it floated Gagfah on the German stock exchange in October, Fortress told prospective investors that it would seek to add to its portfolio of 159,000 well maintained apartments via a series of acquisitions.

In a statement today the company revealed that it has bought, or has contracted to buy, 5,900 apartments, primarily in Berlin, at an average price of €1,027 per square meter.

In the biggest transaction, Fortress is buying 4,900 properties from the apellas Group, owned by investor George Soros, in a deal expected to close next month.

New York-based Fortress has been one of the most aggressive foreign investors in German residential property in recent years. Gagfah became Germany’s largest publicly quoted residential company when it first went public.

Fortress, which raised €853 million in the IPO, bought Gagfah and its collection of 80,000 properties in September 2004 for approximately €3.5 billion from the German federal government’s social security and pension agency.

It has been taking advantage of a trend by German industrial companies, banks and cash-strapped municipal authorities to sell large residential estates in an effort to raise cash, reduce debt, strengthen balance sheets and concentrate on core activities.

Guy Hands’ private equity firm Terra Firma is said to be preparing a similar public offering for Deutsche Annington.

The strategy of both firms has been to buy apartments and try to increase the rents, reduce expenses, and restructure debt.

The average vacancy rates of the latest properties Fortress has acquired is 11.2 per cent.