Deutsche Office sells Frankfurt asset at a discount

Deutsche Office has agreed the sale of the vacant Westend Ensemble in Frankfurt to a private German investor consortium for around €82 mln.

The deal was funded by Swiss firm Helvetic Financial Services.

Located at Ludwig-Erhard-Anlage 2-8, the 35,000 m2 asset was sold at a significant discount to its book value on waning prospects of a quick reletting as well as an impending expiry of the loan.

Deutsche Office had considered converting the asset to residential use but eventually decided to earmark it for sale in early 2014. Subsequently, the asset's value fell from just under €116 mln at year-end 2013 to €90 mln at end-March 2014 and to €88 mln at end-September last year.

Deutsche Office said it will use about half of the proceeds to repay the outstanding liabilities on the property, a €38 mln loan expiring in September 2014.

'The sale of the Westend Ensemble is a logical continuation of our strategy of focusing on office buildings designed to support contemporary and sustainable use,' said Jürgen Overath, a board member at Deutsche Office.

Following the transaction, Deutsche Office's portfolio vacancy rates will fall by about 300 basis points from around 19%. Closing of the deal is expected for April 2015.

Deutsche Office also said it is expecting full-year funds from operations of around to €47 mln, up from the original guidance of €44-46 mln.

'Based on these preliminary figures, we have achieved substantial FFO growth and, at the same time in the financial year 2014, laid the foundations for sustainable dividends in the future,' commented Alexander von Cramm, member of the board at Deutsche Office.

Deutsche Office owns 53 properties with a total rental area of about 936,000 m2 and a value of €1.8 bn.