Patrizia Immobilien AG (P1Z) agreed to buy 36 German office properties valued at about 800 million euros ($1.1 billion) in what would be the country’s biggest commercial real estate transaction this year.
Patrizia is buying the buildings from Austria’s CA Immobilien Anlagen AG (CAI), according to a statement today. The company, based in Augsburg, is making the purchase through a fund that has institutional clients including German savings banks, pension funds and insurers.
Demand for German real estate is rising as investors seek profitable places to put their money amid the European debt crisis. Investors are set to buy about 27 billion euros of German shops and offices this year, the most since 2007, when 54 billion euros of properties changed hands, according to data compiled by Chicago-based broker Jones Lang LaSalle Inc. (JLL)
“It’s an ideal investment for safety-oriented investors who are looking for long-term, stable income,” Patrizia Chief Operating Officer Klaus Schmitt said by e-mail.
Patrizia has about 10 billion euros of assets under management, most of which is held for institutional clients. In April, the company agreed to make Germany’s biggest residential-property acquisition in five years.
“Interest rates are very low and investors who put their capital into property can expect a comparatively good return,” said Helge Scheunemann, head of research at Jones Lang LaSalle in Hamburg.
Offices in prime German locations offer a net initial yield of about 4.75 percent, he said. A 10-year German government bond yields about 1.9 percent, according to data compiled by Bloomberg.
Patrizia is buying office properties in the western German state of Hesse that are leased to the government, today’s statement showed. The buildings have 450,000 square meters (4.8 million square feet) of space. The deal is expected to close this year.
The sale will allow Vienna-based CA Immobilien to focus on building properties in Berlin, Munich and Frankfurt, Chief Executive Officer Bruno Ettenauer said in a separate statement.
“The current market environment is ideal for selling the portfolio,” Ettenauer said.
After property assets more than doubled between 2006 and 2012, CA Immobilien is streamlining its portfolio to become more profitable, provide a regular dividend and increase its equity ratio, a measure of financial strength, to 40 percent from 32 percent.
Patrizia climbed 0.9 percent to 7.44 euros in Frankfurt, while CA Immobilien gained 1.6 percent to 10.54 euros in Vienna, the highest since May 15.
The biggest commercial property deal completed this year was the acquisition by IVG Immobilien AG (IVG) of three office and retail properties in Frankfurt and Berlin in February, according to data compiled by Jones Lang. That transaction was valued at 550 million euros.
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