The property fund company DEGI Deutsche Gesellschaft für Immobilienfonds mbH has announced that it is selling a real estate portfolio named 'Homer', comprising 12 German properties, to companies of funds managed by Oaktree Capital Management L.P.
By acquiring this portfolio, Oaktree and, with a share of 4.8%, its co-investor Colonia Real Estate AG are strategically upsizing their German commercial property platform German Acorn Real Estate. Oaktree Capital Management L.P., headquartered in Los Angeles, is currently managing approx. $ 52 billion in assets. The sale process was initiated as a bidding procedure back in the third quarter of 2007.
Following a carefully chosen succession of individual sales and reinvestments in 2006 and 2007, the sale of the €2.43-billion SPRING end of September 2007 portfolio constituted an important milestone in the GRUNDWERT-FONDS' realignment, which was mainly invested in Germany before. The aim has always been to ensure wider diversification and a sustained level of return. With the sale of another German portfolio Homer, worth approximately €600 million, and new investments in Helsinki and Rome, the fund is now being transformed into a European property fund with around 61.3% of its assets located outside Germany. In the middle of this year, the proportion of German properties was still more than 80%. On a regional breakdown, the fund aims in future to hold 70% of its investments in European economic centers, and the remaining 30% in Germany. It is adopting an investment approach focused on core properties, i.e. it is concentrating on high-quality properties in selected locations.
High outflows in October
The steep rise in the GRUNDWERT-FONDS' share price following the sale of the SPRING portfolio at the end of September, seemingly impelled many investors to return their fund units for short-term profit-taking. Around €1.93 billion were removed from the GRUNDWERT-FONDS in October. The outflows, however, have decreased significantly as time went by. After the sale of the SPRING portfolio, the fund possesses a comfortable cushion of liquidity, so that the coupon redemptions were met without any problems.
DEGI EUROPA to debut in 2008
"With this new transaction, we have seized a unique opportunity to equip the fund for the challenges of the future. With its more European profile, the product now stands for a property-focused investment with a stable return and a significantly upsized proportion of foreign earnings," says Bärbel Schomberg, Speaker of DEGI's Management Board. The fund's new focus will from the beginning of next year also be reflected in a revamped market approach under the name of DEGI EUROPA. "Our aim is to position DEGI EUROPA as a sustainedly attractive basic investment," explains Schomberg. Following the addition of the recently purchased property in Helsinki, the fund will also in December acquire the now-completed Europarco office building in Rome, entirely let to the Italian Ministry of Health. Further purchases in Paris, Prague and Budapest are already being planned. The fund's current one-year return as per 31 October 2007 is 4.2 %. With the completion of this transaction DEGI has halved the fund's vacancy ratio to 5.9% in less than half a year.