Singaporean REIT enters Europe with €356m Frankfurt office tower buy

Singaporean REIT Capitaland Commercial Trust (CCT) has made its first foray into Europe with the purchase of the Gallileo office tower in Frankfurt from Patrizia's Triuva and its institutional investment partners from South Korea.

CCT is taking a 94.9% stake in the building, with parent group Capitaland taking the remaining interest in a share deal worth a total of €356 mln, down 1.4% on the asset's last appraised value of €361 mln per end-March 2018.

The completion of the acquisition is expected to take place in June 2018. The deal reflects a net initial yield of 4%.

The purchase is being funded with bank loans and a private placement.

'CCT has grown to become the largest office landlord in Singapore’s CBD by net lettable area over the years,' said Kevin Chee, chief executive officer of CCT. 'Expanding overseas is a strategic move to deliver long-term sustainable distribution growth to our unitholders and inject diversity to the portfolio.'

The REIT plans to grow its overseas assets to represent between 10% to 20% of its portfolio. 'We have been actively exploring opportunities to acquire core commercial assets in key gateway cities in developed markets,' added Chee.

Gerald Yong, deputy chief investment officer of Capitaland and head of Capitaland International said: 'This is CapitaLand’s second office acquisition in Germany in less than six months following  our acquisition of the Main Airport Center in Frankfurt last December. 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.'

Gallileo is a 38-storey office tower situated in Frankfurt’s central business district providing 34,000 m2 of office space, let entirely to Commerzbank.

The asset was the first office tower investment made in Frankfurt by South Korean institutional investors and the first South Korean institutional club deal in Germany to be initiated and managed by Triuva.

Back in 2013 Triuva (known then as IVG Institutional Funds) bought the 135-metre high tower for a price said to be around €250 mln.

Manuel DeVigili, had of investment management at Triuva, said: '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. The sale is in line with the planned hold period and the investment as a whole has delivered outstanding performance for our clients.'
Patrizia has made several investments with Asian clients, including the Commerzbank tower in Frankfurt on behalf of Samsung, the Astro Tower in Brussels on behalf of a Korean consortium and London’s Madame Tussauds for Fubon Life of Taiwan.

BNP Paribas Real Estate advised the vendor on the deal. The broker also acted as advisor last year to Capitaland in their first European transaction.


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