(Corrects 7th paragraph to say Frankfurt is biggest city in Hesse but not capital)
* EBITDA up 5 pct to 65 mln euros vs Reuters poll avg 57 mln
* Tower 185, Hesse portfolio sales seen finalised by yr-end
* Net profit drops to 4 mln euros on interest rate hedges
VIENNA, Nov 26 (Reuters) - Austrian real estate group CA Immobilien reported an unexpected increase in core profit in the third quarter thanks to record-high rental income and cost cuts in personnel.
Rental income from the company's properties, which are mostly office buildings in eastern Europe, Germany and Austria, rose 6 percent to 75 million euros ($102 million) as the company streamlined its portfolio and raised its rental margin.
Earnings before interest, tax, depreciation and amortisation (EBITDA) rose 5 percent to 65 million euros, CA Immo said on Tuesday. Analysts polled by Reuters had expected a fall to 57 million euros on average.
CA Immo, which is disposing of major assets to boost its equity and lower its loan-to-value ratio, said it expected operational developments to remain stable this quarter and kept it goal of paying a dividend of 2 percent of net asset value.
The company's net asset value was 1.77 billion euros as of Sept. 30, up from 1.69 billion euros at the end of 2012.
CA Immo said last month it had agreed to sell two thirds of its Tower 185 project in Frankfurt to German pension funds for about 330 million euros.
Two weeks later, it agreed to sell 36 office buildings in the German state of Hesse, in which Frankfurt is the biggest city, to Patrizia Immobilien for 800 million euros.
The company said those sales should be finalised by the end of the year.
Net profit dropped to 4 million euros in the quarter from 13 million a year earlier on a fall in the value of its interest-rate hedges, the company said.
Funds from operations (FFO), a measure of sustainable cash flow, fell 8 percent in the first nine months to 70 million euros from the year-earlier period, whose result had been boosted by a gain from finance restructuring in eastern Europe. ($1 = 0.7374 euros) (Reporting by Georgina Prodhan; editing by Tom Pfeiffer and David Evans)