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Commerzbank AG
Three of the funds accounted for more than half, or €4.3 billion, of the total investment volume in 2018: Commerzbank’s hausInvest was the most active fund, investing €1.8 billion.
Singapore’s largest commercial REIT by market capitalization, CapitaLand Commercial Trust (CCT), has acquired the ‘Galileo’ skyscraper in Frankfurt from Patrizia-owned Triuva for €356m, it announced this month.
The 38-story office tower in Frankfurt's financial district is the headquarters of Commerzbank, Germany's fourth largest bank. CapitaLand is majority-owned by Temasek Holdings, the national sovereign wealth fund of Singapore which had €173b of AUM globally last year.
‘Expanding overseas is a strategic move to deliver long-term sustainable distribution growth to our unit holders and inject diversity to the portfolio,’ said Kevin Chee, CEO of the manager of CCT. ‘CCT will remain predominantly Singapore-focused and will look to allocate between 10% to 20% of its deposited property overseas. Germany is a key focus for CCT given the depth of good quality investment grade commercial assets. Frankfurt’s office market is particularly attractive in view of the strong momentum in office demand and resilient rents.’
CapitaLand is betting on Frankfurt’s future place in Europe, Stefan Wundrak, head of European research at real estate management firm TH Real Estate, told REFIRE: ‘The price and super low yield reflect that the new owners have ‘steamy’ rental growth expectations,’ he said. ‘They are buying into growth in the Frankfurt market and it becoming a more important financial hub in the future.’
It is not the first time that ‘Galileo’ has changed hands: in 2013, Commerzbank sold it to Korea’s IVG group for €250m. The sharp increase in value is being attributed by analysts to the resurgence in Frankfurt’s office market, in part due to an increase in demand in wake of Brexit.
‘As investment and asset manager, Triuva was able to acquire this core investment on behalf of South Korean investors at an early stage in the market cycle,’ said Manuel DeVigili, head of investment management at Triuva said. ‘By selling now, we are executing our business plan from five years ago, where we said the aim was to sell it by the end of June 2018,’ he told REFIRE.
For tax reasons, CapitaLand Commercial Trust, will technically own 94.9% of the tower, with the remaining 5.1% held by CapitaLand through a special purpose vehicle. Commerzbank has a lease on the floors currently occupied by its headquarters until 2029, although it retains the option to cancel its rental agreement from 2024 onwards.
Triuva also intends to invest upwards of €700m and as much as €1b in Germany this year, DeVigili said. ‘We’ve already invested around €300m so far and have an additional €450m under exclusivity, so we’re well on track, he said. ‘For our Korean investors, we will be looking for prime office assets in strong, sustainable locations offering a secure income. We’re not just looking at the ‘Big 7’ but also at other cities benefitting from strong rental growth, such as Düsseldorf and Stuttgart.’
The deal is not CapitaLand’s first foray into Germany: in December last year, it acquired the Main Airport Center in Frankfurt for €245m. ‘The acquisition of Galileo is in line with CapitaLand’s strategy of growing its platforms and increasing its holdings of well-located assets in developed markets outside of Asia,’ said Gerald Yong, deputy CIO of CapitaLand Limited and head of CapitaLand International. ‘In deepening our presence in one of the world’s largest and most stable economies, we will continue to deploy capital to achieve higher risk adjusted returns. When the acquisition is completed, CapitaLand’s network in Europe will comprise 46 serviced residences and hotels, as well as two commercial properties with over one million square feet of net lettable area.’
The completion of ‘Galileo’ is expected to take place this month. (ssk)
