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.
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.