The real estate company Brack-NV, controlled by Teddy Sagi, is signing a strategic deal to expand its activity in the development of residential real estate in West Germany. The company reported that it had signed an agreement for the acquisition of all the rights to the land of about 193 hectares in the city of Dusseldorf in return for about 133 million euros.
The Company estimates, based on the Urban Planning Scheme (Urban Building Plan) that in advanced approval procedures, it will be possible to develop about 1,300 housing units on the land, and another 30,000 square meters for commerce, offices, kindergartens and a school. The plan and the accompanying public infrastructure agreement are in very advanced stages of approval in the municipality of Düsseldorf, and therefore the Company expects that the Urban Planning Scheme will be published to the public by the end of 2018. This will enable the Company to obtain building permits and begin development of the project in 2019.
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The acquisition is expected to be financed by a loan from a German bank amounting to 93 million euros, and the remainder from the company’s own resources. At the end of September, the bank had a cash balance of about 75 million euros (solo), as well as unutilized credit facilities in German banks amounting to 58 million euros. The closing of the transaction and transfer of the consideration was set for February 28, 2018.
According to Brack NV’s announcement, “the deal will contribute to making the company the dominant residential developer in the city of Düsseldorf in a way that will enable the company to optimize its economies of scale, both in terms of selling prices in the city and in terms of execution costs.
“The acquired property is the last large plot of land in the city, which is planning for the development of a large residential neighborhood, and expects that from 2020 there will be only three large projects (for the development of over 200 housing units) for residential purposes in the city of Düsseldorf. Of the inventory of housing units planned and not built in the city. The company will hold, together with the acquired property, an inventory of apartments for the development of approximately 2,400 housing units, of which 2,250 housing units in the city of Düsseldorf.
“The expansion of the Pipeline in the area of residential initiation for the next ten years, while doubling the scope of development, from about 100-125 residential units a year to about 200-250 residential units a year after approval of the Urban Planning Scheme for the land division under discussion, in light of the development of several projects at the same time in different locations in the city without fear of cannibalization in selling prices,” Brack-NV reported.
In addition, the Company emphasized that the exposure to residential construction despite the acquisition will remain relatively low – only 17% of the balance sheet and about 10% of total consolidated loans.
The acquisition was made possible by a $200 million capital raised earlier this year by Brack NV.
In addition, the Company reduced leverage in recent years from 55% at the end of 2015 to 43% at the end of the third quarter of 2017 (the ratio between net debt and real estate value – LTV).
Ophir Rahamim, Co-CEO of Barrack NV: “We are pleased to report that after intensive efforts over the last few months and following the company’s capital raising at the beginning of the year,
We have been able to secure the acquisition of the new land division, which will double the inventory of apartments under development by the company and will ensure the pipeline in residential development for the next 10 years in an economically strong city like Dusseldorf.”