Postponement of LEO I deal contributes to Patrizia shortfall
The postponement of a major deal announcement, along with what it described as the costs of complying with the European Union’s AIFM directive, led to the listed Augsburg-based Patrizia Immobilien issuing a warning that it would miss its profit guidance for the full year, but it nonetheless sees the company back on track by early next year.
The company said it was now expecting an operating profit for full-year 2013 of between €38m and €41m, well below the previously forecast expectation of at least €47m, issued as late as November. However, it forecast an operating profit of at least €50m for 2014. For 2012, the company booked an operating profit of €43.9m.
In analyst circles in Frankfurt there was a certain amount of disgruntlement about the profit warning so late in the day, although a number of sources were quoted in the German business press as saying the company had been somewhat reticent about its second-half performance, as it transitions from being a property investor to being a fund initiator and property manager.
As part of this transition, Patrizia has been involved in some of the biggest deals of the year in Germany, increasing its assets under management to about €12bn from last year’s €7bn. By pooling cash from insurance companies and pension funds, Patrizia bought Bavarian landlord GBW AG for €2.5bn in the biggest residential for five years, after similarly pooling investors together to buy the residential housing division of Stuttgart bank LBBW.
It has been an open secret for some weeks that a consortium led by Patrizia has been in talks to buy a distressed portfolio of offices from FMS Wertmanagement, the ‘bad bank’ of failed lender Hypo Real Estate. The portfolio, known as LEO I, is part of the assets that the bad bank is winding down of Hypo Real Estate. The portfolio consists of 18 buildings leased to the state government of Hesse and included the finance ministry in Wiesbaden and the police headquarters in Frankfurt. CEO Wolfgang Egger had said after the third quarter that the company would need a big deal to go through to meet its full year targets, so the delaying of this deal into the next quarter would seem to explain the missed full year targets.
In September, Patrizia itself bought the LEO II portfolio for €800m from Austria’s CA Immobilien AG, which is currently lightening up on its German office holdings to pay down excessive debt.