IVG sells Silberturm to Samsung, cancels Squaire sale
It’s one of the most prominent buildings in Frankfurt, starting life as Germany’s tallest building and changing hands several times over the last few years, while undergoing a major facelift and modernisation that will ensure it remains a landmark for years to come.
The “Silberturm”, or Silver Tower, near Frankfurt’s main railway station, once the headquarters of the now-disappeared Dresdner Bank is now in the proud ownership of an investor group led by South Korea’s Samsung SRA Asset Management.
The 166-metre tall building was sold by IVG Institutional Funds for an unnamed price (but thought in Frankfurt media circles to be around €450m). The current tenant of the property’s 32 floors and 50,000 sqm is Deutsche Bahn, along with its in-house IT service provider DB Systel. Deutsche Bahn’s lease contract remains unaffected by the change of ownership.
A separate adjoining property with 22,000 sqm, housing “board and executive headquarters” and likewise leased to Deutsche Bahn, is part of the Samsung ensemble. Commerzbank, which swallowed rival Dresdner Bank several years ago, sold the property to the IVG consortium in 2012.
The American group Hines acted as investment manager for Samsung and will handle asset management for the property, which holds a DGNB Silver status after its complete refurbishment in 2012.
Meanwhile, IVG Immobilien AG, which emerged from a self-managed insolvency last year after a process which had seen it go from Germany’s largest property company to de-listing from the stock exchange - while wiping out shareholders – said that it now DOES intend to retain ownership of IVG Institutional Funds, which manage about €11bn of European office, retail and logistics property across numerous separate funds. (IVG itself has €3.5bn of assets under management across Germany). This is in contrast to earlier statements by the company, which had said earlier it was looking for a buyer for the funds group.
Another about-turn by IVG is the halting of its ongoing efforts to sell its colossal flagship “The Squaire” property at Frankfurt Airport, which houses tenants KPMG, Lufthansa and two separate Hilton Hotels. IVG stopped the sale after bids from international investors fell short of its valuation of €700m.
A number of bidders, including China’s second largest insurer Ping An, the Qatari sovereign fund, developer Tishman Speyer,and private equity groups Blackstone and BlackRock, were invited to revise initial offers, but these too were rejected. IVG most recently had The Squaire valued in its books at €807m, but analysts consider this now to be closer to €700m
Instead, in somewhat of a surprise move, IVG has arranged a new €470m five-year loan from Bank of America Merrill Lynch to cover holding on to the 80%-let property, which apparently still provides a well-above-average yield for IVG. According to CEO Ralf Jung, in a statement, “The offers we received did not match our valuation of this property. At the same time, the refinancing obtained makes it commercially attractive for us to keep THE SQUAIRE in our portfolio. It shows a commercial viability well above total portfolio’s average”.
The construction costs with enormous overruns of more than €1bn played no small part in IVG’s downfall, and led the group to being taken over by its bond creditors in debt-for-equity deals. IVG’s finance director Fabian John added, “The refinancing terms ensure that, with its current letting levels, The Squaire will deliver an earnings contribution in the double-digit millions.”
He said that the firm’s liability restructuring is now almost complete, following this loan and two further loan agreements made with Deutsche Bank last October for €1.5bn, of which a €680m tranche was secured in a CMBS transaction.