Pramerica and China’s Gingko clinch Siemens Campus deal

We reported back in October last year that the Chinese group Gingko Tree Investment Ltd. was in talks to buy a huge Munich office park in the south-west of the city. The park consists of 37 buildings with 425,000 sqm of gross lettable space, along with parking facilities and open land, all of which is rented out to German engineering conglomerate Siemens AG. The facilities are one of Siemens’ largest locations worldwide.

Those talks have now come to fruition. The Siemens Campus in Munich-Neuperlach has now got new owners after a deal was struck between Hamburgische Immobilien Handlung (HIH) and co-investor RFR Holding to sell more than 50% of the Spezialfonds which owns the whole ensemble to Pramerica Real Estate Investors and partner Gingko Tree. The deal values the campus at €420m.

The various campus buildings were constructed between 1977 and 1988 over 43 hectares, and house about 370,000 sqm of workable space. HIH and RFR Lux Holdings (part of the New York-based vehicle of German emigrants Michael Fuchs and Aby Rosen – see article on Frankfurt’s Eurotower) bought the campus five years ago from the Siemens Pension Trust, agreeing a 13-year lease agreement with Siemens for the entire space, with an option to extend for a further five years three times. The price paid for land and buildings at the time (March 2010) was €336m, with the investment volume of the Spezialfonds rounded up to €365m.

Commenting on the new acquisition, Sebastiano Ferrante, head of Germany at Munich-based Pramerica, which itself is part of giant US insurer Prudential, said: “Growing consumer confidence and the prospects for job growth are fueling improved occupier demand in Germany. We believe Munich’s positive demographic development and strong economic prosperity present excellent prospects and that the Siemens Campus is well-positioned to capitalise on these trends to produce attractive long-term returns for our investor partner.”

Gingko Tree is a division of China’s State Administration for Foreign Exchange (SAFE), which manages China’s more than $3.35 trillion in foreign exchange reserves, among other roles. It is an active overseas investor, albeit with a reputation for secrecy about its dealings, and spent more than $2.44bn in 2013 in the UK buying stakes in 16 properties. Last August it teamed up with the UK Crown Estate to by a shopping centre in Leicester for Stg 345 million pounds.

Last December it partnered up with German fund manager Hannover Leasing to by the €270m Covent Garden 26-storey tower building in Brussels – in what was Belgium’s second largest investment last year. The building is leased out long-term to the European Commission.

This represents the second deal that Gingko Tree and Pramerica will have completed together. A year ago they bought the former Adlerwerke office complex in Frankfurt for €110m. According to Christian Schulz-Wulkow, partner at EY Real Estate in Frankfurt, the preferred choice of the big Asian investors is core assets in the German “Gateway Cities” such as Berlin, Munich or Frankfurt, but “with increasing shortage of the supply of such assets, we can expect to see more investments in secondary locations over the next twelve months, particularly from investors who have already made their first investment in the market.”

While the impact of Chinese (ore even Asian) investors on the German market is still very modest (they made up 1.2% of transaction volume in Germany in 2013 and 2014), the growth trend is well signposted. This will provide good opportunities for both buyers and sellers.

According to Sonja Knorr, real estate expert at Berlin rating agency Scope, “The arrival of Asian investors offers plentiful opportunities for sellers to exit at good prices, with even difficult locations or riskier properties finding interest among potential buyers.” Investors aren’t having it all their own way, though, with big fund managers such as Union Investment, Deka Immobilien, Deutsche Bank or insurer Allianz finding themselves bidding against more Asian investor groups.

“This extra competition is forcing these big buying funds to either back away from acquisitions or develop alternative investment strategies – which doesn’t have to be a bad thing, but it does cramp negotiating room,” said Knorr. “We are also observing how some even very large investments are now being spread over several different funds, as a result.”