Alstria plans to double holdings, launches Frankfurt fintech centre

Listed German real estate firm Alstria Office REIT AG said recently it planned to double its portfolio to €6bn from its current €3bn over the coming years, without being more specific as to when it could achieve this. (See below for details on Alstria's €168.5m acquisition this week of twelve office buildings from Blackstone's OfficeFirst portfolio).

In a recent interview with business daily Börsenzeitung, Alstria's chief financial officer Alexander Dexne said “It cannot be gauged how fast we can double the property portfolio,” adding it had taken the M-Dax listed company nearly 10 years to arrive at the current size since it floated in 2007. At the time, Alstria launched as Germany's first-ever REIT, and is still one of only three existing REITs, with the tax-efficient scheme having largely failed to take off in Germany after the onset of the financial crisis.

Dexne said Alstria was always looking for acquisitions and currently had €250m available in liquid assets. However, the listed sector currently offers no attractive M&A opportunities, he said, with few big variances between relative valuations among companies at the moment.

Alstria was known to have been a bidder last autumn for the 100-unit OfficeFirst portfolio, subsequently bought by Blackstone. Dexne said, "We're continually looking for acquisition targets, and I'm confident that we'll find something, but our motto is, we want to grow sustainably and not just get big at any price."

After early struggles in the initial years as a REIT, the company's loan-to-value rate had been lowered to 40% over the past 12 months to a level that would be maintained for the medium term, said Dexne.

Alstria owns 108 buildings in places including Hamburg, the Rhine-Ruhr and Rhine-Main regions, Stuttgart and Berlin. While it had not been able to tap opportunities in Munich, where prices had always been high, it viewed the city as attractive, as it does Berlin, Dexne said.

Its portfolio in Frankfurt amounts to €500m and could benefit if there is a move towards the city as financial institutions leave London over Britain’s exit from the European Union, he said.

In Frankfurt Alstria recently launched a new Fintech innovation centre, "The Spot", in a 3,200-sqm building in Mainzer Landstrasse, between the main train station and the CBD. The main tenants in ‘The Spot’ are main incubator, the leading Fintech incubator of the Commerzbank Group, and start-up companies such as Ginmon and Billwerk, the fintech- investor Digital+Partners and the Frankfurt office of Clairfield, a leading international finance and M&A boutique.

‘The Spot’ will also host a new ‘Beehive’ space, Alstria's own "24/7, next generation, fully automated co-working space", which offers affordable and flexible office space. Alstria plans to include Beehive space in all its 100+ properties, and create a network with nationwide membership.

The idea is that co-working desks can be rented for as short as one day, and starting prices are at EUR 3.97/day1. Private offices are also available, for teams up to four people, and can be booked for as short as one week. ‘Beehive’ offers to its member access to its full network across the major German cities. ‘Beehive’ also provides several meeting rooms that can be used by the co-working community as well as all the other tenants in ‘The Spot’.

P.S. Just this week Alstria announced it had bought a portfolio of twelve office properties from Blackstone's OfficeFirst portfolio for €168.5m (see article in this issue on OfficeFirst). Alstria said in an initial statement that the portfolio perfectly met its criteria for investment. The average price paid per sqm is €1,590 per sqm, the vacancy rate is 21% and the initial entry yield is 5.9%. The assets, mainly in Hamburg, Düsseldorf and Berlin generate annual rental income of €9.9m and have a weighted average lease term of 3.4 years.

The acquisition is being funded from existing cash resources of €108.5m and new bank loans of €60m. This will result in a new average loan-to-value ratio for Alstria of 36%, which it says is closer to its desired level. The acquisition will increase Alstria's all-important FFO by €7.3m per annum on increased turnover of €9.9m.

CEO Olivier Elamine commented, "This transaction allows us to reinvest the proceeds of all the sales that we made last year. The investment market in which we operate is very tight at the moment, so this transaction is a good example of how Alstria is always in a position to source attractive investment opportunities and act quickly to close deals."