IVG eyes EUR 350m in property sales, shelves REIT

German real estate giant IVG aims to dispose of EUR 350 mln of property by the end of 2008 to help meet its 2008 target of a EUR 1bn reduction in debt.

IVG confirmed its intention on Thursday to sell the properties in the next few weeks after reporting an 87% drop in its consolidated net profit in the first nine months of 2008 to EUR 34.1 mln, from EUR 261.9 mln in the same period in 2007.

The company reported a consolidated net loss of EUR 17 mln in the third quarter of 2008, down from a consolidated net profit of EUR 76.9 mln in the same period last year. Revenues rose 8% in the third quarter of 2008 to EUR 138.6 mln, from EUR 128 mln last year.

Compared with the first nine months of 2007, the group's total income decreased by 13.4% from EUR 893 mln to EUR 773.6 mln. IVG's earnings before interest and tax (EBIT) fell from EUR 384 mln to EUR 252 mln, or by just over 34%. EBIT adjusted dropped almost 43% from EUR 399.1 mln to EUR 228.7 mln.

IVG blamed developments in the financial markets and the knock-on impact on the European real estate markets for affecting IVG's year-to-date earnings. 'Total income has decreased and earnings have substantially declined, in particular due to non-cash charges from the appraisal of properties,' the listed company said.

The current market conditions have also prompted IVG to shelve plans to create a real estate investment trust, or REIT, of office properties with a market value of EUR 3.4 bn. 'The current situation in the capital markets precludes a stock market listing of the IVG REIT in its present form. Therefore IVG is currently no longer pursuing the IPO of the REIT portfolio in this form,' IVG said.

IVG's Investment division has a target of EUR 500 mln in property disposals this year to optimise its portfolio and help reduce its debts. The company said that selling EUR 350 mln of properties held by the company, its funds or joint ventures to meet the target was 'dependant on the willingness of banks to provide potential investors with liquidity'. But IVG conceded that the effect of these additional disposals may not be seen on the balance sheet until the financial year 2009.

The company’s forecast - including unrealised changes in market values and the EUR 1.7 bn caverns transaction which is due to close this month – is for EBIT adjusted in the range between EUR 300-320 mln. Consolidated net profit may also rise to between EUR 50-70 mln.