Oxford Properties bullish on Berlin after Sony Centre deal

Paul Brundage, the European head of Canadian investor Oxford Properties, which recently bought the Sony Centre on Berlin's Potsdamer Platz, said at the recent Expo REAL in Munich that the company now expects to create a special Berlin platform to support the acquisition and further future investments in the city.

Oxford Properties, the real estate arm of the Ontario Municipal Employees Retirement System (OMERS), along with US private equity investor Madison International Realty, bought the six-acre Sony Centre property for €1.1bn from South Korea's national pension fund NPS, in one of the largest European property deals yet this year. The yield is said to be just above 3%.

The acquisition was Oxford Properties' first property deal in Berlin, although it has bought other assets in Paris and London. Brundage said the deal was in line with the Canadian fund's goal of reaching $5bn of continental European assets under management by 2020, with the focus on Berlin and Paris. The Sony Centre deal gives Oxford "the scale to build a platform in Berlin with an 'on-the-ground' team", he said.

Berlin itself could end up representing 5% to 10% of the company's total real estate portfolio in the future, he intimated. "We spent time studying Germany and the challenge is that it is polycentric, whilst we are a type of investors who is very focused on a city strategy in which we go long and deep in scale," commented Brundage.

"In the end we have decided we like Berlin, it is the largest market in the country, it is global and diverse. We think that Berlin’s time is now. There is probably no other city in Western Europe which has had so much change as Berlin. We like the growth prospects, it has already been experiencing some good growth [in terms of rents], but there is still upside."

The eight buildings comprising the Sony Centre have 112,000 sqm of lettable space, comprising the 26-storey Bahn Tower, office, retail and leisure space, as well as 67 residential units. Among its largest tenants are Deutsche Bahn, Sony itself, Facebook, Sanofi Aventis and co-working centre WeWork.

For Oxford, the Sony Centre deal further cements its relationship with Madison, a private equity firm that provides joint venture and preferred equity capital for real estate investors from its offices in New York, London and Frankfurt am Main. The deal, expected to close in the fourth quarter, brings Oxford’s Continental European assets under management to about €2.3 billion and total European assets under management to about €5.5 billion.

This summer, the firm acquired Window, an office building in La Defense, Paris, for about €500 million), which was its fourth Paris asset purchase. Oxford’s European portfolio now comprises 17 assets in London, Paris and Berlin.