Tristan scoops AEW’s City Office fund, Berlin residential

It’s been a busy couple of months for pan-European investment manager Tristan Capital Partners, with two sizeable acquisitions in Germany, both commercial and residential.

In September the Curzon Capital Partners 5LL core-plus fund within the Tristan stable bought a portfolio, known as the Selection Portfolio, representing the entire holdings of AEW’s German cities office fund. Barings Real Estate will be the operating partner for Tristan on the deal.

The AEW City Office Germany Fund consists of seven office buildings with 83,064 sqm. These include two buildings in Cologne, and properties in Berlin, Frankfurt, Munich, Hamburg and Dusseldorf. The properties have a diverse tenant mix with strong covenants with a vacancy rate of only 2%, and generate a rent roll of €16m. The portfolio was put up for sale earlier this year by Colliers in the first quarter, when it was valued at about €480m.

AEW’s Marc Langenbach, head of funds and separate accounts Germany, said in a statement that the strategy had been to carefully assemble a set of well-located offices in six of Germany’s major cities, where AEW could add value through active asset management, including repositioning and leasing to drive the capital value and income quality of the properties. (The occupancy rate was pushed up by 15% to 98%, while the rent roll was boosted by more than 20% through active asset management, since AEW bought the assets.)

Langenbach said, “We think it is the right time to crystallise the value for our investors who signed up for the fund in the first subscription phase… The success of the strategy means that we have already been able to secure capital commitments for the next fund in the series, the AEW City Office Germany II, for which we are actively building a pipeline of potential investments.”

Constantin Plenge, managing director at Tristan Capital Partners, said: “Germany looks set to be one of the markets that recovers fastest from the coronavirus crisis, as the underlying fundamentals across the top six markets remain strong and unemployment is currently at around 4%.

“We believe that we will see sustained demand for high-quality office space in prime locations in Germany over the next few years and that the ongoing demand and supply imbalance will outweigh any short-term, incremental rise in vacancy in the immediate wake of the current crisis. Furthermore, given the location and physical quality of each of the individual properties, we expect that they would be first to re-emerge following any market volatility.”

Christoph Wittkop, managing director and country head at Barings Real Estate, said: “We have worked with Tristan Capital since 2011 and our teams are used to working together on both the transaction and asset management side. The locations, tenant structure, rental level, occupancy rate and condition of the buildings are good across all of these assets, which is even more important than usual in the current environment.”

Earlier in August, Tristan’s EPISO 5 Fund bought 100% of the shares in Berlin-based INHAG Industrie und Handel AG für Vermögensverwaltung, a private company holding German residential and commercial assets. The price paid was about €284m. The EPISO fund is teaming up with Berlin-based operating partner Kauri CAB to manage the 23 properties.

The portfolio comprises 21 residential and commercial properties in Berlin, 16 of which are located in the districts of Mitte, Friedrichshain, and Prenzlauer Berg. The other two properties are a well-known mixed-use building in Leipzig and a residential complex in Bad Homburg, near Frankfurt. Overall the lettable area is 77,500 sqm of which 46,500 is commercial and 31,000 is residential.

Tristan’s Constantin Plenge said of the portfolio, “The split of commercial and residential assets offers attractive diversification benefits to EPISO 5, allowing us to instantly build meaningful German residential exposure at an attractive price. A number of assets in the portfolio also offer the potential for conversions and developments, providing EPISO 5 and operating partner Kauri CAB with added optionality as the pathway out of the current crisis becomes clearer”.