Hessisches Ministerium für Wirtschaft, Verkehr und Landesentwicklung
Hessisches Ministerium für Wirtschaft, Verkehr und Landesentwicklung in Wiesbaden
In the biggest commercial real estate transaction in Germany this year, Augsburg-based Patrizia Immobilien is buying 36 German office properties valued at about €800m from Austria’s listed CA Immobilien.
As with Patrizia’s other recent mega-deals of the past two years, the company is heading a consortium of institutional clients including German savings banks, pension funds and insurance companies. This time, however, Patrizia is not involved as a co-investor, in contrast to its earlier deals, including the major acquisition of Bavarian housing group from BayernLB earlier this year. The assets will be bundled into a new Spezialfonds managed by Patrizia.
The 36 assets have 450,000 sqm of space at 19 different locations. All are leased to and located in the state of Hesse, including the Economics Ministry and state Statistical Office in the capital Wiesbaden and several municipal and administrative buildings in nearby Frankfurt, including several court buildings and police stations. In most cases index-linked lease agreements are in place with the state of Hesse as tenant until 2036, with further options to extend, so the assets would be viewed as very safe and conservative. The deal brings Patrizia’s assets under management to about €10bn.
The assets were all bought by CA Immo in 2006 as part of its entry into the German market, (the so-called “Leo II” portfolio) and co-incided with a series of sales by the Hesse government to free up capital by putting portfolios of state-owned property on the market. CA Immo paid about €770m for the portfolio it is now selling to Patrizia, and leased the assets back to the state.
In a statement, CA Immo’s CEO Bruno Ettenauer commented: “The current market environment is ideal for selling the portfolio, which is fully let to the public sector for the next 20 years. Strong demand for product of this kind and the low interest rate level have combined to provide us with the perfect window in the market cycle to sell the package... The planned sale will also smooth the path for us to consolidate our balance sheet .. while focusing energies on realising current development projects in Berlin, Munich and Frankfurt as speedily and profitably as possible. Organic growth from development will enable us to deploy our expertise as effectively as we can, while guaranteeing the quality of our portfolio for the long term.”
As we’ve reported in REFIRE several times over the last few months, CA Immo is on a drive to streamline its business activities in Germany to become more profitable, provide a regular dividend, and increase its equity ratio to 40% from its current 32%.
In a significant move at the time, CA Immo also bought Vivico Real Estate in the same year it bought the Leo II portfolio. Vivico had extensive inner-city land banks previously associated with the German railway Deutsche Bundesbahn, many of which (such as the Europaviertel in Frankfurt) have given way to major inner-city urban developments. Such developments-in-progress are put on CA Immo’s books at about €660m at end-June.
The Europaviertel also borders on the Tower 185 skyscraper on the edge of Frankfurt’s business district, also owned by CA Immo and housing tenants such as consultants PriceWaterhouseCoopers and law firm Mayer Brown. PwC’s pension fund is thought to be the bidder for a partial sale of the €450m-€500m tower from CA Immo.
(Latest news just in is that CA Immo has in fact just sold two thirds of the Tower 185. Two unnamed German institutional investors - a pension fund and a pension company -, have each acquired one-third of the stakes in the office tower with a market value of around €500m. CA Immo through its German subsidiary is believed to be still holding the remaining third, and continues to handle the asset management. A new long-term mortgage of €300m was also said to be signed at the same time with Bayerische Versorgungskammer who are becoming a sizeable finance provider for real estate deals (see elsewhere in this issue)).