Vonovia to sell stake in a residential portfolio to Apollo

Germany's largest real estate company announced Thursday that Vonovia has a agreement to sell a small portion of its suedewo residential real estate to U.S. investor Apollo for 1 billion euros (1.10 billion dollars).

The deal could signal the faltering German real estate market, where that hasn't been the case. Many significant sales in recent months due to high interest rates and falling home values. The deal values the Suedewo portfolio in Baden-Württemberg in the southwest at 3.3 billion euros. which is less than 5% less than Suedewo's fair value on Dec. 31, according to Vonovia.

The German company, which will continue to manage its portfolio of more than 21,000 homes. units, acknowledged that it was not obliged to exercise the long-term buy-back option, which an internal rate of return (IRR) of 6.95% to 8.30%, including dividends.

With the money received, Vonovia will produce about half of the 2 billion euros in free cash flow of the sale of assets that were expected.

"Not the big bang, and sold 5% below recent fair value, but should be seen as a first step in the Right direction," a local dealer said in response to the news.

At 07:33 GMT, Vonovia shares climbed 2.6% to the top of the German blue chip index. The group planned to sell 13 billion euros worth of real estate in the summer to increase access to finance in the midst of the turmoil in the real estate market.