Hedge Funds Seen Closer to $3.4 Billion German Property Sale

  • Once-stricken IVG seen reporting increase in property values
  • Sale of IVG's main business said to be possible this year

U.S. hedge funds may sell stakes in office landlord IVG Immobilien AG in the second half as a turnaround of the once-struggling German company nears completion, people with knowledge of the matter said.

The funds are most likely to sell IVG’s main property business in a public offering, said the people, who asked not to be identified because the information is private. No final decision has been made on the exact timing and whether the owners will choose a listing over a private sale, the people said. The unit owns more than 3 billion euros ($3.4 billion) of German commercial buildings.

A spokesman at Bonn-based IVG, which on Thursday is reporting financial results for the first time in three years, declined to comment.

IVG’s owners include hedge funds Anchorage Capital Group, Davidson Kempner Capital Management and York Capital Management, according to one person. Representatives for Anchorage Capital and York Capital declined to comment. Davidson Kempner didn’t respond to a request for comment.

Last year, IVG hired Goldman Sachs Group Inc. and Deutsche Bank AG to advise it on the sale of its core property business, people said in October. Spokesmen for the banks declined to comment.

Two-Year Clean-Up

IVG, once Germany’s biggest property company by market value, was taken over by creditors in 2014 after its buildings lost value in the wake of the financial crisis. IVG has spent two years separating its units, exiting countries and reducing debt. Its goal is to create three separate entities, the most valuable of which -- a unit that buys, develops and sells commercial properties -- will be renamed and sold, the people said.

IVG’s commercial buildings, which include the ship-like Squaire near Frankfurt airport, gained value in 2015 as investor demand for the stable returns of German office buildings increased, one of the people said. IVG’s property investments were valued at almost 5 billion euros in its 2012 financial report. The company has since divested assets in London, Milan and Brussels. It plans to sell its Finnish operations in order to focus on Germany, one of the people said.

Office yields fell, typically a sign of rising values, in Germany’s seven biggest markets for workspace last year, according to data compiled by Colliers International. Leasing rose to the highest since 2007 in the period, the data show.

In addition to the core business, IVG has a fund-management unit that invests in real estate on behalf of institutional clients, and a subsidiary that owns underground caves used to store oil and natural gas.

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