Rumours of Canada's Brookfield exploring Alstria takeover

Rumours have been swirling around Germany's first-ever REIT, Alstria Office REIT-AG for several weeks, which has led to a steady - and then sudden - rise in the share price. Canadian investment firm Brookfield Asset Management is thought to be exploring a takeover of the Hamburg-based Alstria, which is effectively a pure-play bet on German office real estate.

Alstria issued a statement saying that it was “made aware that Brookfield might explore a potential takeover offer but is currently not in negotiations.”

If a takeover by Brookfield were to come about, it would be the biggest taking-private transaction in Germany this year. Alstria is valued at about €3.3 billion net of debt, with 110 commercial properties with a value of €4.6 billion located across Germany's major cities, in particular Hamburg, Düsseldorf and Frankfurt. Brookfield already owns 8.35% of Alstria's stock.

Alstria's long-term CEO Olivier Elamine confirmed full-year guidance back in May, but he did warn that letting markets are likely to remain subdued until there is a clearer picture of the effects of the COVID pandemic.

Since its founding 14 years ago as Germany's first REIT, Alstria has traded (i.e. re-sold) a total of 86 separate properties valued at €1.6 billion. According to its figures, it has achieved an IRR for its investors of 7.3% annually - of which 75% was from rental income and 25% from capital appreciation.

Among the company's biggest tenants are blue-chip names such as City of Hamburg (12 %), Daimler AG (12%), BIMA Bundesanstalt für Immobilienaufgaben (5%), City of Frankfurt (3%), GMG Generalmietgesellschaft (2%), Hochtief AG (2%) und Commerzbank AG (2%).

In line with its conservative orientation, Alstria's figures show that at end-December 2020, the company had debt of about €1.8 billion due in 4.9 years on average, an average cost of debt of 1.4%, and an LTV of only 27%. It currently pays a dividend of about 3.6%.

Several major investors are said to be exploring acquisitions in the European office sector in anticipation of a wider-than-expected return of staff to their offices as the pandemic is brought under control. Brookfield itself bought UK business Arlington, which has 36 properties rented to science and technology companies, just last month. A unit of its investment group also bought Modulaire Group, a European designer of modular work spaces backed by TDR Capital, for €5bn last month.

CA Immo, the Austrian-listed investor which also invests in high-quality offices in Germany like Alstria, saw US company Starwood Capital Group increase its stake in the company in July to now hold a majority controlling stake.