The rumours of an Alstria Office REIT-AG takeover, which we reported on in REFIRE back in August, have proved indeed to have substance to them, despite denials by Alstria of ongoing negotiations at the time.
Canadian investment firm Brookfield Asset Management is clearly betting that offices still have a thriving future. The company, through its subsidiary Alexandrite Lake Lux Holdings, bid €3.5 billion for Hamburg-based Alstria, and is aiming for a majority stake of more than 50%.
Alstria's board has given its support to the offer, which is expected to close in the first quarter of 2022.
The €19.50 per share cash offer implies a gross asset value for Alstria of €5bn, and represents a premium of 6.8% to the last reported EPRA NTA (€18.26 per share as of September 30, 2021) and 17.3% to the closing share price on November 3, 2021 (€16.62).
Brookfield managing director Brad Hyler said, "We are believers in office space. I don’t think the office will go away, but we will see corporates use their office space in a different, more flexible way... In five years or so, Alstria will be bigger than now. We want to accelerate what they are already doing. We certainly have the capital resources to do that."
"As a long-term shareholder of Alstria, we have a strong relationship with the Management Board and we are excited about the opportunity to combine Alstria’s prime German office portfolio, established operating platform and market-leading ESG credentials, with Brookfield’s global real estate operating expertise and vast real assets ecosystem, to enable the business to realize its full potential."
Brookfield said it would support Alstria's ongoing strategy, including reducing the annual dividend payment and re-investing excess cash by actively pursuing new value-add refurbishment and repositioning opportunities and accelerated assets rotation. It said it also wants to maintain the composition of Alstria's management board, including keeping Olivier Elamine as long-time CEO.
Elamine himself welcomed the deal, saying "The office sector is going through a fundamental transformation, driven among others by evolving occupier demand and decarbonization needs. There is substantial value for the company to be anchored with a sophisticated shareholder with a longer-term investment horizon than public equity usually allows for, notably during a phase of substantial investment. Brookfield shares our views and understanding of both the challenges and opportunities that will be offered by the market transformation.’
Brookfield, , has been building up a position in Alstria since May, and is now the single largest shareholder in the company with a stake of 12%. Alstria has 111 office properties valued at close to €5bn (including debt), mainly in Germany's largest cities - particularly Hamburg, Frankfurt, Düsseldorf, Berlin and Stuttgart.
Since its founding as Germany's first REIT fifteen years ago, Alstria has proven successful at buying older office properties in good locations, refurbishing and then re-positioning them in the market.
Brookfield, with $650bn of AUM worldwide, has plenty of experience in Germany, and owns and manages prominent assets such as the Quartier am Potsdamer Platz, which it bought six years ago for nearly €1bn, as well as the SI-Centrum in Stuttgart, which in addition to shopping, also houses a hotel, a musical theatre, cinemas and restaurants.
