New York-based private equity real estate giant Blackstone has agreed terms on the largest real estate transaction in Europe this year, at the second of time of asking.
The firm announced today it had agreed to acquire OfficeFirst Immobilien, a company that owns the German office portfolio of Bonn-based real estate company IVG. The price was not disclosed in the announcement, but it is understood to be approximately €3.3 billion.
The price reflects a similar valuation to that which IVG had hoped to achieve upon listing the company on the Frankfurt stock exchange. Indeed, IVG rejected a previous bid by Blackstone, thought to have been closer to €3 billion, last month in favour of a flotation.
But after pulling the public offering just weeks later, a deal with Blackstone resurfaced, leading to today’s announcement.
Blackstone is acquiring the company on behalf of its latest European property fund, Blackstone Real Estate Partners Europe IV. Typically, Blackstone invests outside of the US from its relevant regional fund and its main global fund on an 80:20 split basis.
Blackstone’s head of European real estate, Anthony Myers, said in the announcement: “We are delighted to make another substantial investment in Germany, where we are focused on high quality, well-located assets in the country’s largest cities. OfficeFirst meets that investment criteria, and we are excited to continue working with OfficeFirst in driving value across its portfolio.”
OfficeFirst was launched in the summer, primarily with a view to a floatation and so this outcome will constitute a change of plans for the German company. Its plans had met with a positive response initially from both investment banks and prospective investors. But after they raised concerns about European Central Bank monetary policy and the prospect of a base rate increased by the US Federal Reserve, as well a significant decrease in the FTSE-EPRA/NAREIT EUROPE share index, decision makers at IVG switched tack and a private sale to Blackstone ensued.
OfficeFirst comprises a management team and 97 properties across German cities including Munich, Frankfurt, Berlin, Dusseldorf, Stuttgart and Hamburg. It also includes 11 development sites or land parcels. The net lettable area of the portfolio is 15.2 million square feet and the assets generate €207 million a year in rent, making it a strategic share of the German office market for its incoming owners.
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