German property company IVG Immobilien is to sell its 70 cavern properties into a fund which it will manage
The fund will pay €1.7bn (£1.38bn) for 40 operational caverns – underground storage facilities used to store large volumes of oil and gas - located across Germany, and 30 caverns which have been let to occupiers but are under development. Of the agreed price, €836m (£679m) will be paid in the current financial year.
IVG said the money raised through the sale of the caverns will be used to ‘reduce its debt and hence improve its balance sheet ratios’.
IVG’s CEO Wolfhard Leichnitz said: ‘The caverns business is a project development business. Not only has this core competency enabled us to create substantial value in the Caverns division in the past few years, but we also have considerable earnings potential for the future by developing at least 60 additional caverns.’
The formation of the caverns fund comes after IVG placed the business on the market in February to sell as a whole or in parts.
The company said: ‘Both the option of selling the caverns to an investor and the fund solution were consistently pursued in parallel until the end of the process. At the end of this structured process, IVG decided that the fund solution was the best option for the company.
'It guarantees earnings and cash contributions that will be stable in the long term.’