Evans Randall reduces write-down on €210m “Ten Towers” sale to WealthCap

Evans Randall has sold the Telekom Center skyscraper in Munich for €210m to WealthCap, the German real estate investment subsidiary of UniCredit Bank, financed by a circa 50% LTV senior loan provided by DG Hyp, CoStar News can reveal.

The independent investment bank acquired the 69,000 sq m Munich “Ten Towers” office skyscraper, let to Deutsche Telekom, in June 2007 – at the very inflection point before the credit crunch – from London & Regional for €259m.

This week’s sale to WealthCap reflects a rare write-down taken by Evans Randall, although the boutique investment bank has improved the value of the German tower by almost €40m in the last two years during which the value at worst fell to less than €180m, CoStar News understands.

Evans Randall is believed to have financed the market-peak German office tower acquisition with a €194m five-year legacy Bank of Scotland senior loan, priced at 115 basis points over three-month Euribor and an equity participation by Uberior Europe, BoS’s former European joint venture subsidiary.

The collapse in German office values prompted a restructuring agreement between the now Lloyds Banking Group and Evans Randall, in which the bank is thought to have taken a reduction in its debt and agreed a two-year extension, in exchange for margin step-ups and a focused asset management strategy and subsequent sale.

After agreeing the terms of the restructuring and disposal strategy by early in the first quarter of 2011, Evans Randall recovered almost €40m in value through re-gearing the 69,000 sq m lease to tenant Deutsche Telekom by five-years to December 2022 and improving the rent by €500,000 over its ownership period.

Evans Randall’s sale to WealthCap at €210m is thought to be at par to current value and comes as Royal Bank of Scotland is expected to close on the sale of two office towers in Berlin and Frankfurt, capping an active final quarter for German office transaction activity.

RBS agreed to sell the two centrepiece properties of Morgan Stanley’s former Pegasus portfolio to AXA Real Estate Investment Management and Norges Bank Investment Management for €784m, in a cash purchase that further cements a joint venture partnership established last summer.

The disposal of Berlin’s 16-storey Kurfürstendamm Boulevard tower and the 81,600 sq m Die Welle, a glass tower in Frankfurt’s financial district, unwinds the bulk of RBS’ unintended ownership in direct German office real estate.

RBS’s ownership of the Pegasus portfolio was the consequence of a spectacular failed timing gamble by Morgan Stanley’s P2 Value German property fund, which acquired the portfolio in two tranches from Union Investment Real Estate in May 2007, just weeks away from the bursting of the global property market bubble.

Lloyds has accelerated its non-domestic legacy real estate debt and joint venture participations this year, agreeing to sell the £1.46bn Irish Project Lane portfolio to Apollo Global Management’s Risali Limited special purpose vehicle for £149m, reflecting an 89.8% discount.

Also last week, Lloyds agreed to sell the smaller circa €350m Project Pittsburgh Irish portfolio to CarVal Investors, for a shallower discount.

All parties declined to comment.

jwallace@costar.co.uk

About CoStar News

Finance Editor, CoStar News
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