Prime Office, OCM plan €130m capital increase

Prime Office REIT and OCM German Real Estate have unveiled plans to carry out a capital increase as part of plans to strengthen the capital structure of the new combine.

The two listed German office property companies will issue 50.2 million new shares in a bid to raise a total of €130 mln. The operation will reduce the group's leverage to about 58%.

Funds advised by Oaktree will participate with an investment of at least €65 mln in the capital increase; in addition, one other investor has announced its intention to invest up to €20 mln.

The merger planned for January 21 will create a company with gross real estate assets of around €1.9 bn and a focus on offices in Germany's metropolitan areas. The new combine will operate under the name of Prime Office.

Following the operation, existing shareholders of Prime Office REIT will enter into OCM's share capital with an agreed exchange ratio of 1:1.

'We are delighted that the merger of the two companies is now on the finishing straight and that we can in due course implement our joint plan of creating a leading, listed office property platform with a conservative financing structure,' said Jürgen Overath, CEO of OCM German Real Estate Holding, and future board member of Prime Office.

'With the planned capital increase, we will lay the foundation for attractive cash flows as well as a sustainable growth strategy that should translate into dividends of about 40 to 45% of our funds from operations for our shareholders from fiscal year 2014,' added Alexander von Cramm, CEO of Prime Office REIT.

The new combine, with a portfolio of 920,000 m2, will implement a value-add strategy, the two groups said in a statement.

Berenberg, Kempen & Co and UBS Investment Bank have been mandated as underwriters for the merger and related cash capital increase. Berenberg is also acting as financial advisor.