CLS Holdings buys 12 assets from Züblin in €152m office deal

UK-listed property investment company CLS Holdings has boosted its holdings in Germany by buying 12 assets from Swiss-listed property group Züblin Immobilien, for a gross asset value of €152.2m, excluding costs. The price represents a net initial yield of 6.3%.

The properties comprise 963,596 sq ft (89,521 sqm) of multi-let office space, with a current occupancy rate of 89%, and are let to 157 tenants, with a weighted average unexpired lease term of 3.3 years. They generate a net rent of €10.1 million (£8.9 million) per annum and the top five tenants, representing 28% of contracted rent, are Bosch Group, Panalpina World Transport, Alpine Electronics, Level 3 Communications and The State Government of North Rhine-Westphalia.

CLS will buy 11 of the 12 properties through the acquisition of two existing Züblin subsidiaries, and the twelfth will be a direct property purchase.  The properties are mainly located in clusters around Hamburg, Düsseldorf and Stuttgart, with an asset each in Munich and Wiesbaden. International law firm Taylor Wessing advised CLS on the acquisition.

The cash consideration, net of the net assets acquired with the corporate acquisitions, is €148m. The acquisition, which will be financed from internal resources, is expected to be refinanced in part with bank debt in due course, and should complete in the third quarter of 2017.

According to Fredrik Widlund, chief executive of CLS, said, 'This acquisition is a significant step towards our stated goal of increasing our presence in Germany. It will add significantly to cash flow and is in line with our strategy of identifying properties in well-located, non-prime areas of major European cities providing highly diversified tenant bases, with scope for us to drive value through local asset management opportunities.

'The decision to acquire this portfolio reflects our confidence in the broader German market, and many of these sites are located in cities where there is a structural shortage of office supply.'

For the Swiss group Züblin, the sale represents the disposal of their entire German property holdings. CEO Iosif Bakaleynik had already indicated back in  March when presenting the annual figures that it intended to sell off its German interests, to take advantage of what it saw as strong demand in a good market for office properties.

CLS owns and manages commercial real estate in the UK, France and Germany. Following this purchase, and other acquisitions and disposals since January 2017, the German assets will comprise 31% of the group's portfolio, up from 23% at end-216.