According to Bloomberg, quoting an interview with Mr. Jean-Francois Ott, the CEO of Orco Property Group, the Sky Office building in Dusseldorf should be sold within 2 months at a price probably below the initial estimate of € 140m. Mr. Ott stated that the company is in final talks with two institutional investors. According to Mr. Ott, the market conditions
have worsened in the past months.
Our view:
The building is registered in the books of Orco at a value of € 135.1m. The 33,142 sqms office building is 88% occupied and has a rent level of € 21.4 per sqm per month. Based on the book value of the building, the yield generated at the current occupancy and rent stands at 5.4% while at the ERV level (€8m), the yield would be close to 6.0%. According to CBRE, the yields for prime locations in Dusseldorf stood at 5.1% at the end of 2Q12.
The building is financed with a € 96m loan. While an exact price is not disclosed, we would view as negative an eventual sale of the building at a price below the book value and a sign that the market conditions remain difficult. However, on the positive side, the equity proceeds from the sale could be used partly for refinancing Orco’s € 285.7m GSG loan. The plans to sell the building have been known for almost two years. Orco was up 7.3% yesterday in Paris trading, the third day of positive price movement, after being 40.3% down YTD. We view the news as neutral until more information is available on how much the price is below the initial estimate.