CORESTATE today announced the full acquisition of Frankfurt-based Aggregate Financial Services GmbH (“AFS”), a leading debt financing platform and fully licensed securities trading bank.
Luxembourg, 14 January 2021 – Corestate Capital Group (“Corestate”), a leading independent investment manager for real estate in Europe, today announced the full acquisition of Frankfurt-based Aggregate Financial Services GmbH (“AFS”), a leading debt financing platform and fully licensed securities trading bank.
The transaction will allow Corestate to significantly expand its leading position in the real estate development financing market as well as within the wider real estate sector. The central element of this transaction is also the purchase of a securities trading bank which connects to a broader product range of tailored debt financing solutions in the real estate sector. As a result, the complementary and highly profitable operations at AFS and Helvetic Financial Services (“HFS”), Corestate’s private debt business, will join forces. Subsequently, Corestate will have a strong market position as a financing platform through the whole real estate life cycle and thus enjoy a unique cross-selling potential. As part of this transaction, AFS founders and shareholders Sebastian Ernst and Johannes Märklin are appointed as Members of the Management Board of Corestate with immediate effect for a term of three years; they will also become members of the board of directors of HFS.
René Parmantier, CEO of Corestate: “The experience and expertise of AFS complements our strengths in the mezzanine lending business perfectly. This accretive acquisition will enable us to start a new chapter of growth for our already profitable private debt segment, both in terms of clients and in terms of our service offering. I am pleased to be joined by the experienced and highly motivated new colleagues from AFS which have an excellent track-record and an outstanding network of institutional investors across Germany and Europe. In the upcoming years, we as a team will not only substantially grow our debt financing business, but we will also realize significant cross-selling potentials.”
Friedrich Munsberg, Chairman of Corestate´s Supervisory Board, comments: “For many years, Sebastian Ernst and Johannes Märklin are among the most distinguished German experts in the private debt sphere. We are delighted for them to join forces on a long-term basis with the Corestate team as Members of the Management Board. Together with the current Management Board members, they will further strengthen the successful HFS business and assume further responsibility for the integration of AFS into the wider organisation, fostering significant synergies across the group.”
Sebastian Ernst, Managing Partner at AFS: “The combination of HFS’s standing and AFS’s structuring expertise with primary and secondary market coverage, makes it possible to create a range of products and services for investors and real estate companies that is unparalleled.” Johannes Märklin, also Managing Partner at AFS, adds: “Especially now as traditional banks are significantly restricting their credit exposures, combining our very complementary businesses in AFS and HFS opens up outstanding organic growth opportunities and the possibility to secure and enhance our substantial market share in the dynamic private debt sector at an early stage.”
AFS was founded by Sebastian Ernst and Johannes Märklin in 2018 and has grown rapidly ever since, having enabled more than € 3bn of financings on behalf of real estate clients. The focus lies on financing solutions for acquisitions, developments, constructions and standing properties. AFS generates additional income through corresponding primary market issuances and associated secondary market trading. This acquired platform will offer a wide range of synergetic effects. It completes Corestate´s offering of debt financings, mainly mezzanine, and substantially expands the client base. AFS has a team of more than 20 highly specialised employees and a licence under Section 32 of the German Banking Act for the issuing, proprietary trading and placement of financial instruments.
AFS on a stand-alone basis expects to generate between € 25m to € 30m revenues and between € 15m to € 20m EBITDA for 2021 based on a detailed pipeline of transactions already in progress. In addition, Corestate expects synergies in revenues and costs of at least € 10m annually on a run rate basis within the next three years.
The acquisition is conducted via a capital increase against contribution-in-kind by issuance of 8.5m new shares and € 5m in cash consideration. Based on the closing price as of 14 January 2021 of € 14.73 and with respect to the € 17m net cash position based on the preliminary closing of 2020 accounts the net purchase price is € 113m. This corresponds to a substantial discount to the fundamental value of AFS being in excess of € 170m. Another 1.5m new shares are to be paid as earn-out if the pre-synergy EBITDA increases by more than 50% over the next three years. In both cases, the acquisition of AFS will be earnings accretive. Closing of the transaction is anticipated in the second quarter of 2021, following approval by the responsible supervisory authorities.
Both Sebastian Ernst and Johannes Märklin have entered into a long-term lock-up agreement for their shares in Corestate demonstrating their firm commitment towards the group and all stakeholders.
As it has in recent months, Corestate will continue to pursue its strategy of decreasing net financial debt based on a structured placement process of balance sheet assets. Accordingly, the clear ambition to reduce the financial leverage ratio (the ratio of net financial liabilities to EBITDA) to between 2x and 3x by the end of 2021 remains unchanged.
J.P. Morgan acts as exclusive financial advisor, and White & Case as legal advisor in the transaction.
About CORESTATE Capital
CORESTATE is an investment manager and co-investor with around € 28 billion in assets under management. The company sees itself as a manager for the entire length of the real estate value chain. Thanks to its fully integrated real estate platform, it is able to offer investors a wide range of services, especially the opportunity to invest in large-scale societal trends such as urbanisation, demographic shifts or sustainability – trends that will continue to have a decisive influence on the living and working environment in the long term. The consistent focus on asset classes that will be successful in the long run constitutes a central cornerstone of the company strategy. At CORESTATE, all concepts are supported with ESG expertise that is unique to the industry. With some 800 experts, CORESTATE offers clients and investors a full range of services and consultation from a single source, from project financing and real estate management to sales. CORESTATE is listed on the Frankfurt Stock Exchange (SDAX) and operates as a respected business partner for institutional and semi-institutional investors as well as high-net-worth private investors in 13 countries across Europe, with offices in Frankfurt, Vienna, Zurich, Paris, Madrid and London.
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