Buyers Go Hard on $545M German CRE Portfolio

BERLIN-After nearly two months of work to structure and gain regulatory approval, the $545-million sale of a state-owned real estate portfolio here to Orco Property Group and Morgan Stanley has been financed and is expected to close this week. Encompassing more than eight million sf and offering extensive redevelopment opportunities, the portfolio represents Orco’s largest acquisition to date, notes CEO Jean-Francois Ott, whose firm will own the assets through its subsidiary, Orco Germany, a property company traded on the Frankfort Stock Exchange’s Open Market.

The investment “allows us to control a substantial rental portfolio of great quality in Berlin,” says Ott, calling the German capital “a city that I am very bullish about.” The deal fits Orco’s strategy to increase its income-producing property business, he says, both for the parent group and the partnership of Orco Germany and the Morgan Stanley Real Estate Fund V. Having international real estate giant Morgan Stanley involved “is a sign of confidence in our German strategy that I really appreciate,” Ott adds.

Known collectively as the GSG portfolio, the assets are to be under Orco Germany’s control within the next few days, company officials said in a release. The agreement includes a $47-million cash payment from Morgan Stanley and the contribution of their acquired 50% of GSG to the share capital of Orco Germany in exchange for 14.1 million new shares. After completion, the total number of shares of Orco Germany will be 48.7 million, effectively giving Orco a 57% stake in the venture, with MSREF V holding 29% and a free float of 14%.