JER Partners Adds to Berlin Apartment Portfolio

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BERLIN-The McLean, VA-based private equity investor JER Partners has added to its Berlin apartment portfolio with a $35.68-million, 500-unit acquisition with European Commercial Assets, an affiliate of its exclusive residential partner there, HP Stoessel Unternehmensbeteiligungen. In June, the duo acquired a 1,000-unit portfolio for $60.97-million.

The latest acquisition includes 19 primarily residential properties, the majority of them garden-style developments with four or fewer stories. JER could not immediately provide additional detail on the assets, such as an average age and occupancy, and declined to name the seller, which it describes as “a single private individual.” The company did say it plans to increase the value of their investment through rental growth, refurbishment and modernization.

After the larger June investment, JER officials said the German property market in general and the Berlin market in particular have suffered substantially from an overall economic downturn over the past few years. In a September interview with GlobeSt.com’s sister publication Multi-Housing Forum, JER Patners point man Angus Dodd said housing prices in Germany have been stagnant for the past five years while housing prices in Europe as a whole have risen between 5%- and 15% per annum.

“That’s been a consequence of the German economy, which has generally been depressed for that period,” he said. “So we feel that in Germany, there is latent price appreciation in domestic real estate that we can exploit going forward.”

In addition, Dodd said that a lot of real estate in Germany has been owned by corporations, local municipalities and private individuals. “Certainly, the assets that we’re buying have been markedly under-managed by those owners,” he says. “There is potential to increase rents and perhaps to do some condominium sales.”

Most of the units in the initial purchase are older properties. Its capital budget for improvements is 10%- to 20% of the purchase price. Dodd said the firm’s investors are expecting an IRR above 20% on its multifamily investments in Berlin.