Blackstone to Pay Hefty Price for OfficeFirst Immobilien

After turning down a previous offer from Blackstone earlier this fall, IVG Immobilien AG has agreed to sell its office subsidiary for $3.65 billion.

By Gail Kalinoski

Dietmar Binkowska
Dietmar Binkowska

London and Frankfurt—After scuttling an initial public offering and a previous offer by private equity giant Blackstone this fall, Germany’s IVG Immobilien AG has agreed to sell OfficeFirst to Blackstone in a move that will expand the firm’s German holdings in the country’s biggest cities.

OfficeFirst was formed earlier this year by IVG to hold mostly office properties. The company’s portfolio comprises roughly 15.1 million square feet of assets in six citiesFrankfurt, Berlin, Hamburg, Stuttgart, Dusseldorf and Munich. Blackstone already owns about 4.3 million square feet of high-quality assets in all of those cities except Stuttgart.

“We are delighted to make another substantial investment in Germany, where we are focused on high-quality, well-located assets in the country’s largest cities,” Anthony Myers, head of European Real Estate at Blackstone, said in a prepared statement. “OfficeFirst meets that investment criteria, and we are excited to continue working with OfficeFirst in driving value across its portfolio.”

IVG had planned an IPO for the OfficeFirst portfolio, which would have been biggest IPO in Europe’s real estate sector this year, but pulled the plug in October because of investor concerns, according to The Wall Street Journal. Blackstone soon entered the picture with an offer but several of the hedge funds that own IVG opposed selling the portfolio of 97 properties at that time. Two weeks later, apparently the deal was sweet enough and IVG said it would sell the OfficeFirst portfolio to Blackstone. The two firms did not disclose the price, but WSJ and other media are reporting it will be about $3.6 billion. The portfolio is being acquired by Blackstone Real Estate Partners Europe IV.

“In roughly two years, we have fundamentally restructured IVG’s real estate business and by spinning off and refinancing the core portfolio in OfficeFirst Immobilien AG, successfully created a standalone platform ready for the capital market that holds and manages an attractive commercial property portfolio,” IVG CEO Dietmar Binkowska said in prepared remarks. “In Blackstone, OfficeFirst gains an owner and partner ideally suited to driving forward the strategic development of the business for the good of the company.”

IVG said Blackstone’s offer “corresponded with IVG management’s value expectations” for the assets, which comprise one of the largest office portfolios in Germany. The deal calls for Blackstone to acquire all shares in OfficeFirst.

Blackstone currently has about $102 billion in investor capital under management in hotel, office, retail, industrial and residential properties in the United States, Europe, Asia and Latin America.

Last November, Blackstone bought a logistics portfolio from Immofinanz that included 36 properties in Germany and Eastern Europe. Two-thirds of the assets are in Germany and have been rolled into Logicor, its European logistics platform.