Germany's IVG to hive off €3b core office portfolio

German property Group IVG Immobilien has announced plans to spin off a €3 bn core portfolio of assets into a separate company.

'Within our overall portfolio, we have identified a core portfolio with a value of around €3 bn with significant upside potential. We intend to move this prime cut of IVG Immobilien into a separate company,' IVG's CEO Dietmar Binkowska announced at the company's annual general meeting held on Thursday.

The package involves the group's core office properties in Germany.

The move, which is seen as the next strategic step to restore the Bonn-based company's capital market viability, will create a new unit focused on the group's own portfolio, replicating the structure already used for the business with structured real estate products for institutional investors (IVG Institutional Funds) and the caverns business (IVG Caverns).

According to Binkowska, this initiative will allow the group 'to improve comparability with other market participants'. 'We will also simplify the possibilities for refinancing the property portfolio and will ultimately open up a wide range of options for action that will enable the management to react quickly and flexibly to opportunities and challenges on the market,' he noted.

The preparatory work has already been underway for some time, he added.

According to Juergen Herres, head of Corporate Communications & Marketing, these options for action 'for the time being just means, that the company improves its position in terms of transparency, comparability and flexibility when it comes down to capital market opportunities'.

'There are no tangible or specific plans today. However, we are going to enable IVG to address capital markets or to conduct transactions as a pure play in the German office property market,' he said. 'The German office property market is, as we believe, on its way to consolidation. In order to put IVG’s management in a position to react promptly and flexible to changing market conditions we need to separate our core portfolio from other business items.'

While the company is just 'opening up doors' at the moment, as Herres put it, 'this could lead to a scenario where new investors might be welcome – whatever a potential transaction might look like', he added.

Earlier this year former CEO Ralf Jung left the company due to 'differences of opinion between him and core investors on the future strategic direction' of the German office property investor.

Bonn-based IVG emerged from insolvency in late 2014 following a major debt restructuring whereby the creditors of a syndicated loan ended up with 80% of the company's stock. Holders of a €400 mln convertible bond took control of the remaining 20%.

The company, which owns flagship assets such as London's landmark Gherkin tower and Frankfurt's Squaire building, began proceedings in 2013 and later delisted its shares.

'We expect to generate a sound positive result in the current 2015 financial year,' said Chief Financial Officer Rolf Glessing.

During the shareholder meeting, Wolfgang Bauer was elected as a new member of the supervisory board. The 56-year-old industrial engineer works as an independent auditor and tax consultant in Frankfurt am Main. Up until March 2014, he had worked for almost a decade and a half as a member of the Management Board of Dyckerhoff, including 10 years as its chairman.