IVG has issued and fully placed the first specialized real estate fund for sustainable buildings (IVG PREMIUM GREEN FUND). The fund invests a total of approx. 300 million in four new or almost new (modernized) and sustainable (green) office properties. The properties are being developed by IVG in Berlin, Bonn, Frankfurt and Munich. The fund's properties have been completed or will be completed in the period between December 2009 and November 2010. Legal ownership of the properties will pass to the fund after completion and after the tenants have moved in.
The IVG PREMIUM GREEN FUND will be issued in a club deal structure with a total of five investors. Each investor will provide 33 million of the available equity, which will therefore amount to a total of approx. 165 million. IVG will also participate in the fund and will hold a substantial share of 20 per cent. This co investment will ensure that all the parties involved will share the same interests over the fund's entire lifetime. The payout yield will be in the range of 6 per cent, and the target IRR will be in the range of 8 per cent. This calculation is based on a borrowing ratio of 45 per cent, relative to the fair market values.
The office properties are in good city-centre locations and have excellent connections to the transport infrastructure. At all four locations, terminals or bus stops of the local public transport systems are within walking distance. On 1 April 2010, the pre-letting rate of the portfolio, which is made up of a total of 10 office buildings, amounted to approx. 90 per cent. The tenancy agreements on average extend over a period of 10.5 years. IVG assumes that the properties will be fully let upon completion. For office space which will be let after the transfer to the fund, IVG will provide a rent guarantee for a period of two years. The purpose of IVG's PREMIUM GREEN FUND is to take advantage of the real estate cycle and the growing demand for "green" properties to
achieve attractive sales proceeds.
The real estate portfolio of IVG's PREMIUM GREEN FUND covers a lettable area of nearly 81,000 m² (of which approx. 90 per cent is office space) as well as 871 parking spaces. The "Hackesches Quartier" in Berlin accounts for the largest part of the investment (45 per cent by value). The portfolio's second focus is the office property "An den Brücken" in Munich (33 per cent). The portfolio is complemented by investments in the fully modernized "Frankfurt-Central" building in Frankfurt (14 per cent), across from Frankfurt's central railway station, and the 2009 completed "Artquadrat" office building in Bonn (8 per cent).
The key standard for IVG's PREMIUM GREEN FUND is the green building rating system LEED (Leadership in Energy and Environmental Design), which was developed by the U.S. Green Building Council and which enjoys the greatest international acceptance among investors and tenants. The minimum requirement that the fund's properties have to meet is a "LEED Silver" status. IVG will endeavour to achieve higher certification levels. The main advantage of this construction quality is costeffectiveness. In an optimum balance, the additional expense of approx. 2 to 10 per cent associated with sustainable construction
will be offset by higher rental income.
Along with reducing operating expenses, sustainable buildings provide a healthy working environment, and they reduce environmental pollution as well as the long-term follow-up costs of ecological damage. In addition, scientific studies have come to the conclusion that office buildings which are geared towards sustainability can be positioned much better in the market because of their construction quality (e.g. energy efficiency, room temperature and air quality, service charges, image). This means that these properties have measurable competitive advantages compared with conventional buildings, which will have a positive impact on letting and on the development of the buildings' value.
Source: IVG
