DIC said today the value of its real estate fell 8.5 percent in the year until the end of 2008.
In a letter to shareholders, which include Morgan Stanley, the group said it expected to make a profit of €25 million ($31 million) for 2008 and that the decline in value of its holdings was “sustainable”.
In addition, the firm said it had reduced the interest rate of a €350 million ($445 million) financing package used to acquire a property portfolio in 2006 by 50 basis points by restructuring the interest hedging arrangements. At the same time, it has extended the fixed interest period to seven years helping it to reduce annual interest payments for the portfolio by approximately €1.6 million.
DIC acquired the Odin portfolio with 28 properties and over 260,000 square metres in 2007. A trio of banks, Berlin Hyp, Landesbank Berlin and Landesbank Baden-Württemberg helped restructure the interest hedging.
The firm has also managed to finance one of its opportunistic co-investments. It has signed a project financing contract with Hamburger Sparkasse which will cover its €35 million Hamburg “Opera Offices” project. The fund is developing around 15,000 square metres of commercial space in the centre of Hamburg opposite the Hamburg State Opera. DIC acquired the building from the city of Hamburg at the end of 2006. The redevelopment work and new construction should begin at the end of 2009.
“These decisions show that it is possible, even in the current financing environment, to reach suitable agreements with partner banks of long standing provided the basic conditions are right,” it said to shareholders.