Fortress Investment Group has agreed to acquire 61 German office properties for approximately €2.1 billion ($2.7 billion) as the alternative investment giant continues to expand its massive real estate portfolio across Germany. DB Real Estate, via its open-ended fund DB Grundbesitz Invest, was the seller.
The Fortress acquisition is being transacted via its subsidiary Eurocastle Investment, a closed-ended investment company focused on German commercial property. The acquired properties comprise approximately 840,000 square meters of Class-A office space. According to a statement released by Eurocastle, the properties currently have an occupancy rate of 83 percent and an average remaining lease term of five years. Almost 90 percent of the properties’ rental stream comes from buildings located in or around Frankfurt, Munich, Berlin, Hamburg and Dusseldorf. The initial rental yield is 5.6 percent.
The deal is the latest in a string of acquisitions for Fortress in Germany. In September, Eurocastle purchased a $500-million office portfolio from DB Real Estate encompassing 190,000 square meters throughout the country. Earlier this year, Eurocastle also raised €350 million in an IPO to help finance a €2 billion portfolio of 300 properties from Dresdner Bank. Thus far, in 2006, the firm has funded or committed to approximately €3 billion worth of German commercial property (excluding the Dresdner portfolio).
Fortress has been equally active in the residential sector. In March, the firm spent €1.7 billion to purchase 48,000 apartments from the city of Dresden, the first time a German municipality sold its entire portfolio of public housing to a foreign buyer. And earlier this year, the firm successfully floated a 20 percent stake in its German residential property business, Gagfah, raising €850 million and becoming Germany’s largest listed real estate company in the process.
In November, Fortress, which manages more than $26 billion of capital, filed to go public on the New York Stock Exchange.