Case Study: Neumuenster

Denver Investment Real Estate Multifamily Neumuenster

Investment Type: Multifamily Redevelopment

Location: Neumuenster
Purchase Price: EUR 19.4m
Units: 542
Sq ft: 376,103
Vacancy: 4.0%
Cap-Rate: 6.15%
Projecte 5-Year IRR: 21.91%

The portfolio is comprised of 14 multifamily buildings totaling 538 residential units, 4 commercial/retail units and 105 parking spaces. 173 of the units are in senior and assisted living housing. The properties were built between 1924 and 1985 and are located very centrally and in popular neighborhoods with good walking scores. Sixty-three percent of the portfolio was subject to rent control at the time of purchase.

The properties are in the province of Schleswig-Holstein, located approx. 45 min. north of Hamburg. Neumunster is also very close to the Danish boarder (100 km) and only about 30 minutes from the North Sea. The city is well positioned on the ICE railway network giving travellers direct access to Germany's major cities.

Most of the portfolio was well maintained and had been modernized where necessary. The portfolio was acquired in 2007 subject to an earn-out clause requiring completion of refurbishments works regarding a 22-unit property. The completion of work and subsequent leasing reduced the vacancy rate to approx. 4%. The project was completed and fully leased within 6 months.

Further capital investments of EUR 540k were made repositioning a third of the portfolio in preparation for single asset sales. Approximately half of the portfolio has been sold to private buyers.

10% of the net operating income was pooled into ground rents and securitized in a AAA-rated bond transaction, allowing the investor to realize a significant return on investment shortly after acquisition.