Deutsche Bank Forming Major Property Trust

FRANKFURT-Locally based Deutsche Bank AG says it will combine its three Australia-based REITs into that nation’s fourth largest property fund and acquire 80% of a US industrial property portfolio. Under the proposal, Deutsche Diversified Trust, Deutsche Industrial Trust and Deutsche Office Trust would be combined into a single property trust valued at A$3.5 billion ($2.5 billion), making it the fourth largest listed property trust in Australia. Additionally, it would buy four-fifths of a A$1.5-billion ($1.1 billion) US industrial property fund owned by CalPERS and managed by Rreef, a Chicago-based division of Deutsche Bank. The new entity would be known as DB Rreef Trust.Mergers among Australian property companies have been rampant. In recent weeks, Westfield Group combined its Australia and U.S. trusts, creating the world’s biggest manager of shopping malls by market value; Centro Properties Group agreed to buy Prime Retail Group for A$393 million ($276.6 million); and Macquarie Office Trust announced it would take over Principal America Office Trust for A$857 million ($603.1 million). Analysts say the move by Deutsche is designed to assist in the funds’ expansion into the US and fend off takeovers, thereby protecting and growing the A$24 million ($16.9 million) in management fees Deutsche earned last year from managing the trusts. As part of the proposal, DB Rreef Trust and Deutsche will enter into a 50-50 partnership to manage the Australian funds management business, comprising in excess of A$10.1 billion ($7.1 billion) in listed and unlisted funds under management. Deutsche Office Trust, valued at A$1.5 billion, owns interests in 17 Australian office properties. Deutsche Industrial Trust, valued at A$663 million, has interests in 35 industrial properties. Deutsche Diversified Trust, valued at A$1.4 billion, owns interests in 26 office, retail, industrial and car park facilities. The combined DB RREEF Trust will rank fourth in Australia behind Westfield Group (A$25.8 billion), General Property Trust (A$7.13 billion) and Stockland (A$7.11 billion). Deutsche Bank, Gresham Partners and UBS AG are advising on the merger. Merrill Lynch & Co is providing advice on the U.S. acquisition. The transactions are expected to be completed by October. In related news, Deutsche Diversified and Sydney-based Westfield Group say they will form four ventures to jointly own Australia real estate worth A$1.45 billion. As part of the agreement, Westfield will pay A$273 million to buy 50% stakes in shopping malls in the cities of Perth, Adelaide and Melbourne, while Deutsche Diversified will spend A$110 million to buy 50% stakes in a Westfield shopping center in Brisbane and other assets. The deals bring together Deutsche, one of the world’s largest real estate equity managers; CalPERS, the largest public pension fund in the US, and; Westfield, the world’s largest retail property group based on market capitalization.