Samsung the winner with €730m bid for Commerzbank HQ

Samsung SRA Asset Management, a consortium of financial divisions of South Korea's Samsung Group, was named last week as the preferred bidder to take over Germany's Commerzbank's headquarters in Frankfurt, the tallest office building in Europe.

Commerzbank, Germany's second largest bank (after Deutsche Bank), decided for Samsung SRA's 900 billion won (€730m) bid, ahead of rival bids from Singapore's sovereign wealth fund GIC and KIC Korea Investment & Securities.

The 257m-tall tower, built in 1997, is owned by two closed-end funds of Commerz Real, the bank's own real-estate fund subsidiary. Commerzbank itself had a first option to buy the tower, but in opting to sell to the Korean group, will now lease back the building from the new owners.

SRA Asset Management, a wholly-owned commercial real estate subsidiary of Samsung Life Insurance, is also being funded by Samsung Securities and Samsung Fire & Marine Insurance, and will fund the acquisition with its blind fund for real estate investment, as well as Samsung Securities’ 150 billion won acceptance financing.

The winning Korean consortium made another big European acquisition this year, buying the So Ouest office tower in Paris in January for about 400 billion won (€325m). In June 2014 it paid 230 billion won for German defence company Thales's Stuttgart headquarters.

Commerzbank has a fortuitous history in its dealings with South Korea. In 1998, shortly after the foreign exchange crisis in South Korea, it invested 350 billion won to become the majority stakeholder of Korea Exchange Bank, and sold off its stake to Lone Star in 2003 for a 600 billion won profit.

Commerzbank suffers like many German banks from poor profitability, and its recent second quarter results highlighted the dilemma faced by the larger banks of the 'overbanked' nature of the German market. Lending at the current low level of interest rates and margins to corporate customer is unprofitable, and the bank is trying to inrease lending in its retail bank to protect margins. However, restructuring costs are also heavy, hence the need to raise fresh funds through disposals and the ongoing sell-off of the legacy loan-book of Eurohypo (see article on Oaktree in this issue). Commerzbank shares are trading at close to all-time lows, like those of across-town rival Deutsche Bank.