Buyout group Blackstone is in talks to acquire German real estate group Officefirst in a potential 3 billion euro ($3.6 billion) deal, three people familiar with the matter said.
Officefirst, which comprises a portfolio of about 100 German office buildings, including the landmark Squaire at Frankfurt airport, is being auctioned off by property group IVG.
The sale is being pursued alongside a possible listing of the unit.
IVG and its hedge fund owners hope to lock in high prices in the country’s buoyant property market, and IVG will decide around mid-September whether to pursue with the listing or whether to sell the company outright, these people said.
A sale would allow IVG to divest the whole company at once, while an IPO would only allow IVG to sell an initial stake of about half of Officefirst’s shares, with the remaining shares sold off in subsequent placements, these people said.
Since a revaluation of Officefirst’s properties in late 2015, its current enterprise value stands at 3.25 billion euros, with equity accounting for about 1.25 billion euros and debt for the rest.
People familiar with the company have said that IVG is hoping to see Officefirst’s equity valued at about 1.5 billion euros in a potential IPO, with shares worth 700-900 million euros placed with investors. Some of the proceeds would be used to pay down debt.
Private equity groups are generally more comfortable holding companies with higher debt levels, and Blackstone is expected to offer to buy Officefirst for up to 3 billion euros including debt, one of the people said.
IVG went through insolvency proceedings in 2013 after cost overruns at its Squaire premises made debt levels unsustainable.
It is rare for multi billion-euro portfolios to come onto the market, and a number of investors are vying for German property exposure, which promises comparatively high yields in the current low interest rate environment.
However, several initial suitors – such as property groups Alstria or Patrizia – are no longer pursuing the asset, the people said.
IVG and Blackstone declined to comment.