CapitaLand International targets German gateway cities

Singapore-based CapitaLand International - the wholly-owned international business unit of one of Asia’s largest real estate firms, CapitaLand Group – is on a drive to boost its exposure to German gateway cities next year, CapitaLand International’s CEO, Gerald Yong, told REFIRE this month.

‘We will actively explore opportunities across various asset classes in key gateway cities as well as growth locations and sectors,’ he said. ‘We’re seeking to deepen our presence in the gateway German cities where we have existing presence such as Berlin, Frankfurt and Hamburg. This will enable us to leverage our network of properties to reap economies of scale and operational efficiency as well as to cross-market to our clients. We see strong potential to step up investments in commercial real estate and expand our lodging portfolio in Germany.’ (He declined to comment on how much CapitaLand would like to invest next year.)

Currently, CapitaLand Group’s network in Europe comprises two freehold prime commercial properties with over one million square feet of net lettable area as well as more than 5,500 units in 46 serviced residences and hotels. Its wholly owned lodging unit, The Ascott Limited, has been operating in Germany for over 15 years and its real estate investment trust, Ascott Residence Trust, owns five properties with over 700 units across Berlin, Frankfurt, Hamburg and Munich.

‘Germany’s tourism sector is expected to continue with its strong growth in upcoming years,’ Yong said. ‘Coupled with the country’s healthy economic growth and employment rate, demand for lodging will continue to remain strong.’

According to the German National Tourist Board (GNTB), inbound travel to Germany has increased for eight consecutive years, reaching 83.9m international overnight stays in 2017, with a projected 80% increase by 2030. Germany is also a popular destination for business, achieving almost 10% more business travel trips than its peers in Europe, according to the GNTB. It is also placed first worldwide as an international trade fair destination and first in Europe as an international conference destination, according to the GNTB.

Offices are also high on CapitaLand’s agenda, Yong said: ‘In Frankfurt where our commercial developments are located, the office market is also on an upswing as there is broad-based increase in office demand led by strong economic growth. Market research from BNP Paribas has also indicated favourable trends in office vacancy, rents and take-up rates in the region.’

Singapore recently inked the European Union-Singapore Free Trade Agreement (EUSFTA), which will provide better market access and business opportunities for both Singapore and EU organisations growing their business in each other’s market. ‘As a Singapore-headquartered company with a strong presence in Germany and in the EU, we stand to benefit from the expected uptick in flow of investment, expatriates and business travellers in both markets, which will, in turn, generate greater demand for our lodging and commercial properties. We can also look forward to greater competitive edge and better access to business opportunities in the region,’ Yong said.

It has been a busy year for the group. In June, CapitaLand Commercial Trust, Singapore’s largest commercial REIT by market capitalization, and one of five REITS in CapitaLand’s stable,acquired the ‘Galileo’ skyscraper in Frankfurt from Patrizia-owned Triuva for €356m.The 38-story office tower in Frankfurt's financial district is the headquarters of Commerzbank, Germany's fourth largest bank. It is not the first time that ‘Galileo’ has changed hands: in 2013, Commerzbank sold it to Korea’s IVG group for €250m. The sharp increase in value is being attributed by analysts to the resurgence in Frankfurt’s office market, in part due to an increase in demand in wake of Brexit. The deal is not CapitaLand’s first foray into Germany: a year ago, it acquired the Main Airport Center in Frankfurt for €245m.

CapitaLand is majority-owned by Temasek Holdings, the national sovereign wealth fund of Singapore which had €173b of AUM globally last year. CapitaLandhad over S$92b of AUM as of 30 September 2018, comprising integrated developments, shopping malls, lodging, offices, homes, real estate investment trusts (REITs) and funds.