SEB in further giant portfolio sell-off, NorthStar enters Europe
The big news around the turn of the year was the December acquisition by US REIT NorthStar Realty Finance of a €1.1bn office portfolio from Frankfurt-based SEB Asset Management. This was the American group’s first foray into Europe, and they have topped that off with a further deal worth reportedly about €500m from German insurer Provinzial NordWest.
The deal made headlines both because of its size but also for its complexity, spanning seven different countries and tax regimes, and the fact that, in comparison to earlier large-scale deals, there was no ‘volume discount’ given the size of the portfolio. Additionally, the sale went through including an asset management mandate for the seller, which is unusual.
The structured sale by SEB Asset Management, which is in the process of unwinding its international German open-ended fund, involves 11 ‘Class A’ European office properties are in London, Paris, Hamburg, Milan, Brussels, Rotterdam, Amsterdam and Gothenburg. The portfolio consists of 186,300 sqm with a well-diversified mix of market leading tenants and includes high-profile office buildings such as Condor House and Portman Square House in London, Drehbahn/Dammtorwall and Valentinskamp in Hamburg, Issy-les-Moulineaux in Paris and Maastoren in Rotterdam.
The average age is eight years and the portfolio is currently 93% leased with a weighted average remaining lease term of six years, including periodic rent reviews. Prominent tenants include BNP Paribas, Cushman & Wakefield, Chartis Europe, AIG, Barclays, Invesco UK, Ernst & Young and Deloitte. About 50% of the rent from the portfolio comes from London and Paris.
The sale was to NorthStar Realty Finance and Cale Street Partners, a London-based real estate finance and investment firm backed by sovereign wealth capital which will provide part of the financing and helped to source the deal. NorthStar said it anticipates an initial leveraged yield of 13%. The price reflected the book value of the assets in SEB’s books, in which the 93%-let portfolio was held across the German open-ended fund SEB ImmoInvest, as well as funds SEB ImmoPortfolio Target and SEB Global Property.
SEB will retain an interest in the portfolio through its asset management mandate for the properties and hence has an ongoing interest in adding value to the assets. SEB’s CEO Barbara Knoflach commented, “The huge interest shown by global institutional investors shows that we were offering a very attractive investment product. Our portfolio strategy will see us continuing to offer attractive core and value-added products to the international investment market.”
The deal was obviously not a one-off – albeit on a major scale – for NorthStar, who are clearly intent on kicking off their European engagement with a wide footprint. Although still unconfirmed, several reports suggest that NorthStar has paid between €450m and €500m for the so-called Trias portfolio owned by insurer Provinzial NordWest, in a structured bidding process.
The Trias portfolio is spread across nine European countries and includes 260,000 sqm office, retail, hotel and logistics properties. The assets, including properties in London, Paris, Berlin, Madrid and Lisbon, have been asset-managed by IVG, Deka and Internos.