IVG Is Readying $3.6 Billion Office Unit for Possible Sale

  • Preparations will be completed this year, CEO Binkowska says
  • New Frankfurt-based unit may be real estate investment trust

IVG Immobilien AG, the German property company that was taken over by creditors two years ago, will bundle most of its office properties into a new business this year, in preparation for a possible sale.

IVG is "well advanced" in the process of creating a property unit with about 3.2 billion euros ($3.6 billion) of German buildings, Chief Executive Officer Dietmar Binkowska said at a briefing in Frankfurt on Thursday to present IVG’s first financial results in three years.

"We are on track to be viable for capital markets in 2016," Binkowska said. The new subsidiary will be based in Frankfurt and may be structured as a real estate investment trust, Binkowska told reporters. A sale of the unit could be in the form of a public offering or a trade sale, though IVG could keep the business. "We are leaving all options open," he said.

Separate Units

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.

The company is now owned by hedge funds including Anchorage Capital Group, Davidson Kempner Capital Management and York Capital Management, people with knowledge of the matter said on Wednesday. The owners are applying pressure for a possible sale, though not at any price, Binkowska said.

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.

The Squaire

All of IVG’s commercial buildings, which include The Squaire near Frankfurt airport, were valued at about 3.4 billion euros at the end of 2015, compared with 3.1 billion euros a year earlier, according to IVG’s annual results. Most of those will be placed in the new unit. IVG is close to hiring executives to run the business, Binkowska 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.

IVG has repeatedly failed to sell The Squaire, built in 2011 for more than 1 billion euros and which was valued at 807 million euros in IVG’s 2012 annual report. In 2014, IVG sought 700 million euros for the property, a person with knowledge of the deal said at the time. Binkowska wouldn’t say how much The Squaire is worth now.

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.

The Triuva institutional funds business, which has about 10 billion euros of European buildings under management, may also be sold eventually, Binkowska said.

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