DIC takes over Morgan Stanley fund stake in EUR 190m portfolio

German listed property company DIC Asset has acquired the 50% stake in three joint ventures previously held by funds advised by Morgan Stanley Real Estate Investing. The deal makes DIC Asset the sole owner of a portfolio with a market value of some EUR 190 mln consisting of around 20 office properties in Berlin and Frankfurt.

The average initial rental yield in relation to the purchase price comes to 7.7%.The acquisition from DIC’s long-standing project partner was carried out through a share deal involving low transaction costs, the company said in a statement. A 'meaningful discount' on the portfolio's existing net asset value (NAV) was also agreed on, it added, but declined to provide further details. Market sources put the discount at around 30%.

The transaction boosts DIC Asset's rental income by some EUR 7 mln year-on-year while FFO (operating income) will increase by some EUR 3.5 mln over the same period. As a result, FFO income for the fourth quarter of 2011 will amount to around EUR 0.9 mln, the company said.

The takeover allows DIC Asset to achieve its targeted portfolio growth of EUR 200-300 mln for 2011. Following purchases in March (EUR 108 mln) and September (EUR 78 mln), the company has now lifted the value of its portfolio this year by over EUR 280 mln.

The latest addition encompasses a total lettable area of some 90,000 m². The majority of rental income is generated from office space (72%) and about 17% from retail.

DIC Asset will assume the long-term financing of the previous joint ventures with an average loan-to-value (LTV) of some 70% and an average interest rate of 3.2%. The terms will remain unchanged.

Established in 2002, DIC Asset AG is headquartered in Frankfurt am Main and focuses exclusively on investing in German commercial real estate. The 280-asset real estate portfolio is valued at EUR 3.2 bn.