IVG to Hold IPO of $3.7 Billion German Landlord This Year

  • Proceeds to be used to reduce debt, pay for REIT conversion
  • Blackstone is said to have made offer for OfficeFirst

IVG Immobilien AG plans to proceed with an initial public offering of its German office unit, which owns real estate valued at 3.3 billion euros ($3.7 billion), by the end of the year.

The IPO will consist of new OfficeFirst shares amounting to 450 million euros as well as stock owned by IVG, the German property company said in a statement on Friday. The proceeds from the sale will be used to repay debt and partially cover the cost of turning the company into a real estate investment trust. The shares will be traded in Frankfurt.

“Financial markets are open to IPOs at the moment and there’s a significant interest in German real estate,” OfficeFirst Chief Executive Officer Michiel Jaski said in a telephone interview. “The company has drawn a lot of interest, particularly from investors looking for yields.”

IVG, which was taken over by creditors in 2014, created OfficeFirst this year to hold most of its office properties. Blackstone Group LP had offered to buy OfficeFirst for about 3 billion euros, a person with knowledge of the matter said this week.

The investors will probably seek to raise 800 million euros to 1 billion euros from the stock, a person familiar with the matter said on Thursday. OfficeFirst plans to pay a dividend for this year equivalent to about 50 percent of its funds from operations. From 2017, the payout will amount to 65 percent to 70 percent of FFO.

‘Greater Momentum’

“The IPO and the planned use of the proceeds will give us even greater momentum, and allow us to further lower our cost of capital,” Finance Director Fabian John said in the statement. “In doing so, we are targeting a loan-to-value of approximately 45 percent.”

OfficeFirst plans to become a REIT in 2017. About 96 percent of the company’s properties by value are in six German cities including Frankfurt, Berlin and Munich.

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