Eurocastle Investment Limited, the closed-end investment company focused on German commercial property and controlled by Fortress Investment Group, has sold a portfolio of German commercial properties to Goldman Sachs’ Whitehall Street Real Estate Funds for €325 million ($423 million).
The portfolio consists of 78 “non-core” properties encompassing 254,000 square meters of leasable space. According to a statement released by the company, the sale price exceeded Eurocastle’s carrying value by approximately 9 percent and will result in a net gain of €26 million.
The geographic location of the assets sold was not disclosed, but Eurocastle has publicly stated that it is focusing most of its efforts on the major metropolitan markets in Germany, which includes Frankfurt, Berlin, Hamburg, Dusseldorf and Munich. Approximately 50 percent of the company’s German property assets, pro forma for the acquisition of a €2.1 billion portfolio from Deutsche Bank, which closed in February 2007, is concentrated in those cities.
“The transaction is consistent with our previously disclosed intent to dispose of non-core assets and will further enhance Eurocastle’s ability to focus its strategy on high-quality office properties in the major real estate markets in Germany,” Bruce Snider, managing director of the Fortress affiliate which manages Eurocastle, said in a statement.
Since its inception in 2003, Eurocastle, which is listed on the Euronext exchange, has significantly expanded its German portfolio. Last year, the company grew its real estate investment portfolio by €2.8 billion. In February 2007, the company closed on its previously announced acquisition of a €2.1 billion property portfolio from DB Real Estate. Almost 90 percent of the DB portfolio’s rental stream came from buildings located in or around the five major German metropolitan markets. Following that transaction, Eurocastle’s German commercial real estate investment portfolio totaled approximately €5.4 billion of assets consisting of more than 600 properties and approximately 2.5 million square meters of leasable space.
According to statements filed with the US Securities and Exchange Commission in connection with the initial public offering of Fortress in February, Eurocastle has generated substantial returns since its inception. Through January 17, 2007, the investment company had generated a total return to stockholders, including reinvested dividends, of 69 percent per annum.