German Vacation
Archstone-Smith buys a European firm.
Two years ago, Archstone-Smith, a REIT in Englewood, Col., began studying the European apartment markets. A year and a half ago, it sent Dana Hamilton, managing director of Archstone B.V. (its European subsidiary), to Amsterdam to get an up-close look at the market. So it came as no surprise when, in July, Archstone announced it was making a $649 million acquisition of a German company: Deutsche WohnAnlage GmbH (DeWAG).
The transaction consists of more than 6,100 residential units in some of Germany’s most desirable metropolitan areas, according to Archstone, including Rhine-Main (Frankfurt/ Wiesbaden), Düsseldorf, Munich, Stuttgart, and Hamburg. The deal also comes with plenty of upsides. “Germany has the second-lowest homeownership rate at 43 percent,” Archstone CEO R. Scot Sellers said in a July conference call with Wall Street analysts. “Rental rates are very low and quite affordable for the majority of the population, which provides significant room for future increases.”
But rent control laws are tougher in Germany, which can handcuff landlords. “There are a lot of complex issues related to operating this portfolio,” says Craig Leupold, a principal with Green Street Advisors, a San Diego-based independent research and consulting firm concentrating on publicly traded real estate securities.
But the DeWag deal does help Archstone-Smith accomplish three things in Europe: further establish a presence there, enhance its portfolio with a great collection of well-located residential assets, and benefit from the experience of a highly regarded European management team.
–Les Shaver
Executive Feedback
What’s the most important piece of advice you’ve been given since you’ve been in the apartment business?
A: “Do what you say you’ll do with a sense of urgency. You’ll be the one people count on. But don’t rest on your short-lived laurels. Continue to strive for success. Be recognized not for what you did, but what you will do.” –Constance B. Moore, president and CEO, BRE Properties
A: “Work hard and give your best at any job that you are doing. Do not get caught up in the politics of the corporation, and treat all individuals you interact with as you would like to be treated.” –Christine Freeland, CEO, Riverstone Residential
A: “Successful companies run on principles, execution, heart, and imagination. Be fair and professional with all constituents, including those on the other side of the table at negotiations.” –Thomas W. Toomey, president and CEO, United Dominion Realty Trust A: “Since I deal primarily on the capital side of our multifamily investment fund business, the advice I took to heart was [to] always be transparent to your investors and deliver information ahead of bad news, and be temperate with good news, because situations change very quickly.” –John Williams, managing partner of capital markets, Carmel Partners