Singapore’s CapitaLand enters German office market

Singapore-based real estate group CapitaLand has made its first foray into the German office market, with its acquisition of Main Airport Center (MAC) in Frankfurt for €245m.

The multi-tenanted office building has been purchased via a joint venture. CapitaLand holds a 94.9% stake while Singaporean construction firm, Lum Chang Holdings Limited, an unrelated third party, holds the remaining 5.1% stake. The building is 84% occupied by more than 30 tenants, including Dell and Mastercard. MAC is banking on an occupancy rate of over 95% by June 2018 based on the leases already secured for next year.

‘The acquisition of MAC leverages the Group’s 15 years of experience in Germany and will add to CapitaLand Group’s network of commercial buildings in Asia,’ said Lim Ming Yan, president and group CEO of CapitaLand. ‘We are very pleased to be able to have meaningful investment exposure in a quality income-generating office building well located in Frankfurt, a top investment destination in Europe. Besides key Asian markets such as Singapore, China, Japan and Vietnam, we also see significant investment opportunities in key gateway cities in Europe, Australia and the U.S.’

MAC is strategically located close to the Frankfurt Airport, one of the top five busiest airports in Europe, and a 20-minute drive to Frankfurt’s Central Business District. It is expected to attract more tenants when a new metro station 600 metres away opens in 2019, and a third airport terminal opens in 2023.

CapitaLand will ‘remain aggressive but disciplined to reconstitute its portfolio and deploy capital to quality higher yielding assets’, according to Lim.

Frankfurt’s office market is on an upswing as many major multinational companies and Japanese banks are planning to open new offices there. according to Lee Chee Koon, CIO CapitaLand and CEO of CapitaLand’s serviced residence owner-operator, The Ascott Limited.

‘The city’s office leasing market remained strong in the third quarter of 2017 with a 24% year-on-year increase in take-up of leases,’ he said. ‘The transaction volume for offices also grew by around 13% year-on-year. We see strong potential to step up investments in commercial real estate in Europe and key cities worldwide, as we expand our serviced residence and mall portfolios.’

Germany’s economic growth remained on a positive course last year, driven largely by exports and investment. Its GDP grew by 0.8% in the third quarter, beating the 0.6% median forecast in a Bloomberg survey. Overall, GDP growth in Germany was expected to hit 2.3% last year, according to the ifo Institute in Munich, before rising to 2.6% this year and growing by a further 2.1% in 2019.

CapitaLand, together with its commercial real estate investment trust, CapitaLand Commercial Trust, is Singapore’s biggest prime office landlord. It also owns and operates commercial properties in China, Japan and Vietnam. In September 2017, CapitaLand Commercial Trust acquired Asia Square Tower 2 in Singapore for S$2.09b (€1.28b). CapitaLand, CapitaLand Commercial Trust and Mitsubishi Estate Co., Ltd. formed a joint venture in July to redevelop Golden Shoe Car Park into a 280-metre tall, 51-storey landmark development in the heart of Singapore’s Central Business District. The total development is estimated to cost S$1.82b and is expected to be completed in 2021.

CapitaLand’s serviced residence unit Ascott has been operating in Germany for 15 years and its REIT, Ascott Residence Trust, owns five properties with over 700 units across Berlin, Frankfurt, Hamburg and Munich in Germany. (ssk)