According to Reuters, Berlin Senate approved on 20 March 2007 the sale of GSG property in Berlin to JV fromed by Orco
and Morgan Stanley (MSREI). However the deal is still subject to approval of the Berlin Parliament and the merger control clearance.
We already mentioned last year when Orco
informed about potential EUR 400m deal with MSREI for the first time that we see the deal very positively as Orco
could increase its exposure to Berlin market by 800,000 sqm of office space. Based on expectation of 50:50 JV and our conservative assumption of Berlin average montly rent of EUR 7/sqm versus market average of EUR 10.5/sqm and a yield of 8% versus the average band of 4.75 – 5.75%, the market value per sqm comes to EUR 1,050, while Orco
/MSREI would pay just EUR 500/sqm. Orco
can thus realize immediate profit of EUR 220m of EUR 23 per fully diluted share, should the deal is approved. Note that Berlin is seen as relatively attractive market as it shows the signs of rebound, following several years of depression.