Dream Global in talks with South Koreans on expanding JV

Canada's Dream Global REIT said on Thursday that it is in discussions with South Korean pension fund POBA on expanding their partnership with an additional office property in Hamburg.

Dream Global acquired the Millerntorplatz 1 office building in the German port city for $134.1 mln (€95.7 mln) at end-December and is now in talks with POBA to sell 50% of the asset to the fund.

The acquisition, which is scheduled to close by the end of January 2015, will be Dream Global's largest asset in Hamburg. Built in 1997, the multi-tenant property is leased to a variety of tenants including Deutsche Rentenversicherung, Germany's largest state pension fund, and the City of Hamburg.

The asset comprises 375,000 sq ft of gross leasable area and has a weighted average remaining lease term of 5.3 years. Dream Global will acquire the property at a going-in cap rate of 6.0% and has secured mortgage financing at 60% loan-to-value.

The Canadian REIT said it has also completed the sale of a 50% interest in seven German assets to POBA as part of their joint venture first announced in August last year.

In total, POBA has now invested a total of $315 mln (€221 mln) in the portfolio, reflecting a cap rate of 5.3%. The seven office properties are the ABC Bogen in Hamburg, Löwenkontor in Berlin, Werfthaus and K26 in Frankfurt, doubleU in Düsseldorf, Z-Up in Stuttgart and Marsstrasse 20-22 in Munich.

POBA (Public Officials Benefit Association) is a South Korean pension fund for government officials with 235,000 participants and one of the most active overseas real estate investors in South Korea. Since it was founded in 1975, it has built a global commercial real estate portfolio that includes assets in England, China and Brazil.

'The new acquisitions were financed at interest rates 90 bps lower than the mortgages they replaced, with longer terms to maturity. Including the management fees that will be earned by the Trust, we anticipate an additional $0.03 per year of Adjusted Funds From Operations per unit from this transaction,' said Alex Sannikov, vice president of portfolio management at Dream Global REIT.