Canadians, Korean pension fund in JV for €240m German investment

Korea’s Public Officials Benefit Association (POBA), the pension manager with 6 trillion won (€4.5 billion) in assets, is to invest approximately €250m million into prime German real estate via Canadian listed company Dream Global REIT.

The long-term joint venture with Toronto-based Dream Global REIT (previously known, until recently, as Dundee International) will see POBA acquire a 50% interest in seven properties owned by the Dream. The properties are: ABC Bogen in Hamburg; Löwenkontor in Berlin; Werfthaus and K26 in Frankfurt; doubleU in Düsseldorf; Z-Up in Stuttgart, and Marsstrasse 20-22 in Munich. The deal was done at a cap rate of 5.3%.

The deal is expected to close in stages through the third and fourth quarters of this year. Dream Global REIT said that it would reinvest the net proceeds from the transaction into high-quality office properties in its target markets.

“This strategic joint venture and significant acquisition of a high quality office portfolio in Germany allows us to expand into one of the most highly sought-after real estate markets in the world. With Dream, we have found a partner on the ground who is not only an experienced owner and operator of real estate but also understands our unique requirements,” commented Eunghan Park, executive managing director of POBA, in a statement.

Jane Gavan, president and chief executive officer of Dream Global REIT, added: “This joint venture offers us the opportunity to diversify our sources of capital, to leverage our REIT operating platform by generating joint venture management income and to continue to take advantage of the attractive investment environment.”

Founded in 1975, POBA – as a pension fund for government officials - has grown from around 79,000 members to more than 235,000 last year. Its investment portfolio includes commercial real estate assets in the UK, China and Brazil.

Dream REIT (as Dundee) entered Germany three years ago by acquiring a portfolio of over 1,000 assets belonging to the Deutsche Bundespost. It has been gradually selling off and buying new assets, and repositioning itself on the German market. Overall, Dream has invested €125m this year so far in Germany, and sold assets worth €21m.

According to Michael Cooper, board vice-chairman at Dream, “We are excited that we are being recognized for establishing an excellent platform in under three years that provides value to joint venture partners to co-invest with us. We now can grow with equity from the sale of properties from the original portfolio, with partners and with equity from the Canadian capital markets. The opportunities in Germany are plentiful and strategic partners like POBA will help us grow in Germany and potentially elsewhere when we identify appropriate opportunities.”

At the end of July, Dream completed the acquisition of "Officium" in Stuttgart, Germany, from developer Tishman Speyer. The asset is a multi-tenant property with a blue-chip tenant roster that includes insurer AXA, banking group Deutsche Sparkassen and software firm Oracle. The acquisition of the €46.9 million property has a cap rate of 6.6% and will add approximately 28,000 sqm of high quality office space in one of the Big 7 office markets in Germany to Dream’s portfolio. Dream said it had arranged 7.5-year mortgage financing for the asset at a loan-to-value of 60% and an interest rate of 1.99%.