CC - Gizmo23
Trianon - Frankfurt
We reported in last month’s REFIRE about the well-publicised sale of the Trianon skyscraper in downtown Frankfurt by NorthStar Realty Europe Corp. to the South Korean consortium made up of IGIS Asset Management and Hana Financial Investment. The sale, at €670m, was the biggest deal in Germany this year.
The deal was completed earlier this month, and NorthStar realty said in a release to the New York Stock Exchange that it earned an internal return of 20% on its investment since it acquired the triangular Trianon Tower in July 2015. The transaction releases $360m of net equity after repayment of financing and transaction costs and a $6m retained interest in the form of preferred equity certificates with a 7% yield.
According to Mahbod Nia, CEO and President of NorthStar Realty, "Having completed a number of complex, value enhancing asset management initiatives during our ownership period we are pleased to announce the sale of Trianon. The sale crystalises an approximate 20% IRR and further enhances NRE’s track record of consistently creating value for stockholders since inception."
The Trianon Tower is the sixth tallest office building in Germany at 186 metres, with total rentable area of 68,000 sqm over 46 floors, and was NRE’s largest asset, he said.
Since acquisition, NRE completed an extensive refurbishment program including elevator, lobby and canteen renovation, full upgrade to latest fire, life & safety standards as well as a rebranding focused on highlighting the building's credentials as a dominant landmark, it added. NRE subsequently leased seven vacant floors and secured lease extensions with Deutsche Bundesbank, the second-largest tenant, and Franklin Templeton, the third-largest tenant.
At the time of the sale, Richard Tucker, the head of capital markets in Frankfurt at Cushman & Wakefield, said: “Trianon is perfectly positioned to not only benefit from the projected out-performance of Frankfurt rental growth, but also from the city’s appeal as a leading global financial centre.” The building is currently fully let and benefits from a long average weighted unexpired lease term, in excess of 6.5 years to expiry.
Argie Taylor, the head of APAC cross-border capital markets at Cushman & Wakefield, said: “The sale follows a comprehensive global marketing campaign, which saw the building generating significant interest from a broad spectrum of investors in Europe, China, Hong Kong, Singapore and South Korea.”
Back in July 2015 NorthStar Realty bought the Trianon for €540m from Madison International and a Morgan Stanley fund, who had been looking for a buyer for the tower since the previous year. Madison had bought a 56.95% stake in the tower from Morgan Stanley’s ill-fated P2 Value Fund in 2012, when the Trianon was thought to have a book value of €471m. Morgan Stanley itself had paid €620m for Trianon in 2007, at a then initial yield of 4.2%.
At the time, NorthStar said it planned to invest €250m of equity into the acquisition, targeting an initial yield of 8%. Chairman and CEO David Hamamoto said then, "We believe this prominent office tower will be a great addition to NRE given its strong fundamentals, including being one of a very limited number of buildings in Frankfurt with greater than 40 floors, which demand premium rents in the market."
