Alstria get green light for DO Deutsche Office takeover
The board at Germany's first REIT, the Hamburg-based Alstria Office REIT AG has received a resounding 'yes' from its shareholders for the required capital increase as a prelude to its announced voluntary public takeover offer of fellow-listed DO Deutsche Office AG. An almost clean sweep of 99.71% of Alstria shareholders voted in favour at a recent extraordinary general meeting.
Alstria is issuing 68.7mm new shares to effect a capital increase of €68.78m which it is offering to DO shareholders. This corresponds to 0.381 new Alstria shares for each DO share. Further details of the takeover offer will be determined in the offer document, due out by the end of August.
Should the takeover go through, as is likely, the new company will be the largest pure commercial office investor in Germany, with a portfolio valued at €3.5bn with leverage. Alstria requires acceptance from 69.6% of DO's voting shares, and DO's major shareholder Oaktree has already committed its 60% stake to the takeover.
The deal will consolidate Alstria’s position as Germany’s biggest office company, with a combined market value of €1.7 billion. It would add Deutche Office properties in Frankurt - with tenants including Allianz SE and Deutsche Telekom AG - to Alstria’s holdings mainly in and around Hamburg, Dusseldorf and Stuttgart.
On a conference call, Alstria's CEO Olivier Elamine said the merger should boost Alstria's key FFO measure to 75 cents in 2015, up from its previous forecast of 62 cents. He anticipates cost savings of about €2.5m from efficiency gains and up to €15m annually in financing benefits. He said that Alstria had secured a bridge loan of up to €1.1bn to address potential change of control provisions under current loans at DO Deutsche Office. While short-term the company's LTV ratio would rise to 50%, said Elamine, Alstria would be renewing efforts to get it back down again to a more comfortable 40% in the coming years.
The German office sector is seeing the highest level of investment since the pre-crash year of 2007, with investment last year rising by 26% from 2013 to €17bn, according to BNP Paribas Real Estate.
Earlier this year DO Deutsche Office sold one of its most prestigious but troublesome assets as part of its active asset management approach including big value-added projects. It sold the vacant 35,000 Frankfurt Westend Ensemble for €82m to fast-growing German developer CG Group, headed by ambitious developer Christoph Gröner, after years of trying to find a suitable use or tenants for the more than 100-year-old previous headquarters of the Post Office. Half the proceeds went to pay off liabilities on the property, last valued at €88m.
CG Group now plan to convert the landmark building to residential and add a 17-storey high-rise in a €260m investment. It plans 203 owner-occupier apartments in the listed building on the site, a further 60 owner-occupier flats in new buildings and 219 rental flats in a new residential tower. The newer structures on the site will be demolished. Start of construction is scheduled for 2016, with completion due in 2019.