Pirelli shares German deal with MSREF and RREEF

Italian real estate firm Pirelli RE is teaming up with the property funds at Morgan Stanley and Deutsche Bank in its €462m German residential and retail deal.

Italy’s Pirelli RE, Morgan Stanley Real Estate Funds and RREEF, the real estate fund management business owned by Deutsche Bank, have agreed to share properties owned by German real estate company Deutsche Grundvermogen (DGAG), which Pirelli is taking over for €462 million ($579 million).

In a statement, Pirelli RE said the deal to buy DGAG should complete by the end of the year, subject to approval from Germany’s anti-trust authority.

It added that most of DGAG’s portfolio is comprised of residential properties totaling 21,403 units in Hamburg, Lubeck and Kiel. These will be transferred to a recently formed 35/65 joint venture with RREEF.

The remaining properties comprising three shopping centers, two of which are in Hamburg, will be transferred to a 30/70 joint venture with Morgan Stanley Real Estate Funds, the company said.

The takeover comes after recent reports that Germany’s HSH Nordbank was mulling either a sale of its 38 percent stake in DGAG or a flotation of the company.

To gain complete control of DGAG, Pirelli is buying B&L Immobilien, a German property company which owns the other 62 percent of DGAG.

Pirelli said the takeover was being funded via €130 million of equity and a €310 million non-recourse bridging loan supplied by Hypo Real Estate. The company also said the deal would take its assets under management from a book value of €12 billion to around €13.5 billion, including €2 billion outside Italy.

A spokeswoman for RREEF said this was the first time RREEF had invested in the German residential market and that it was the start of a strategic partnership to invest in residential property in both Germany and Italy.

It is the second time in a week that investors have announced significant German residential property deals in a week. French company Fonciere des Regions said last Wednesday it had agreed to pay Morgan Stanley Real Estate Funds €2.1 billion for a package of German property assets, including 40,000 houses in Dusseldorf.