MSREF sells stake in French IBM portfolio at 20% discount

Morgan Stanley Real Estate Fund (MSREF) has sold its 75% interest in a 115,000 m² office portfolio in France at a discount of around 20% to market value. The transaction will see MSREF's 25% joint venture partner, Fonciere des Regions (FdR) take full control of the properties, which are worth nearly EUR 60 mln.

The portfolio includes a number of properties in the French cities of Bordeaux, Orléans and Montpellier, and is around 75%-rented to IBM at current rental levels. The assets have a residual lease of 4.1 years, an average cap rate of about 9% and a vacancy rate of 15%.

MSREF and FdR acquired the portfolio in 2004 as part of an outsourcing operation. Originally, the portfolio included seven buildings representing 127,500 m² rented to IBM.

'This acquisition, based on a portfolio of office assets leased to a major tenant and with value creation potential, is fully in line with FdR's strategy and also contributes to simplifying its structure,' FdR said in a statement. The assets in Montpellier offer the possibility to add a further 20,000 m² of office space to the existing complex in the near future. 'We are currently working on projects while seeking future permits,' an FdR spokesperson said.

The transaction will have a positive impact on FdR's net recurring income (+EUR 1 mln) and Net Asset Value (+EUR 15 mln). In late 2009, MSREF also sold a 50% stake in the Velizy Campus business park located south-west of Paris, to FdR for around EUR 191 mln, reflecting a yield of 7.7%.

Additionally, the French office-focused group said on Tuesday that it has carried out EUR 120 mln worth of sales at an average yield of 4% in the first quarter of 2010.