Blackstone REIT Selling Spanish Offices to CDL-Backed IREIT for €138M

CDL-sponsored IREIT Global has teamed up with Paris-based Tikehau Capital to acquire a portfolio of office properties in Spain from a Blackstone-controlled REIT, according to an announcement to the Singapore exchange.

The European-focused real estate investment trust has agreed to form a 40:60 joint venture with Tikehau, which holds an approximate 17 percent stake in IREIT, to buy the four freehold offices in Barcelona and Madrid from Coruna Patrimonial SOCIMI for €138.2 million ($153 million).

The proposed transaction would allow Blackstone to complete its liquidation of a REIT that it set up on Spain’s Alternative Stock Market in 2016, as Singapore’s CDL, part of billionaire Kwek Leng Beng’s property-focused empire, continues to indulge its taste for European assets.

Buying Offices in Spain’s Largest Cities

IREIT’s target portfolio consists of a pair of office buildings in the northeastern Madrid business hub of Manoteros and another two properties outside of Barcelona.

The properties in Madrid – Delta Nova 4 and Delta Nova 6 – are adjacent to each other and have a combined 24,972 square metres (268,796 square feet) of gross leasable area, with overall occupancy currently standing at 94 percent.

Built in 2005 and fully refurbished four years ago, the two buildings are located a three-minute walk from the Parada Virgen del Cortijo metro station. Delta Nova 4 has a weighted average lease to expiry of 4.3 years, while Delta Nova 6 has a WALE of 2.8 years. Tenants include Clece, Digitex, Gesif and Almaraz Nuclear Power Plant.

Acquiring Deutsche Bank’s Former Southern Europe HQ

The first of the Barcelona properties, Il Lumina – a 1970s office building that was refurbished fifteen years ago – is located in an industrial area five kilometres west of Barcelona’s city centre.

With a total gross leasable area of 20,922 square metres, Il Lumina tenants include Catalan Media Corporation, Digitex and Coca-Cola European Partners plc, with a WALE of 3.2 years and a 69 percent occupancy.

The final building in the portfolio, Sant Cugat Green, is located in a business hub 17 kilometres northwest of Barcelona’s city centre and was originally built in 1993 as Deutsche Bank’s Southern European headquarters.

The 26,134 square metre property has a weighted average lease expiry of 6.8 years and is 77 percent leased to tenants including Roche and Sodexo.

Current passing rents in the properties are generally below market rates, according to IREIT’s manager, providing the potential to boost rental income through active asset management.

Coruna Patrimonial SOCIMI, which forrmerly held five properties, was assembled from a portfolio which Blackstone acquired in 2014 for €135 million. The proposed deal marks the completion of the Blackstone-sponsored real estate investment trust’s divestments following its €80 million sale of the MB One building in Madrid to the UK’s Grosvenor in April.

Building Up a European Portfolio

For IREIT, the deal marks the trust’s first acquisition in Spain, with CDL — which has a 12.4 percent interest in IREIT Global and owns 50 percent of the REIT’s manager — supporting the transaction via a S$32 million ($24 million) bridging loan.

CDL’s bridging loan will be drawn down by the REIT manager to fund required cash outlays in the interim period prior to the closure of the acquisition, which is expected by the end of December this year.

“The strong support from our key unitholders Tikehau Capital and CDL is a clear testament on their commitment and support to the long-term growth strategy of IREIT,” said Aymeric Thibord, the chief executive officer of IREIT’s manager.

Under the terms of the proposed acquisition, Tikehao Capital, which owns the other 50 percent of the REIT manager, will grant IREIT a call option to acquire its 60 percent stake in the portfolio.

Singapore REITs Aim for European Offices

The proposed acquisition follows at least two other purchases of European offices by Singapore-listed REITs within the last six months.

Just over two months ago, Lendlease launched its Lendlease Global Commercial REIT, which included the grade A Sky Complex, which the REIT acquired for S$400.3 million.

In June, Cromwell E-Reit purchased six European freehold office properties — three each in France and Poland — for 246.9 million euros (S$378.2 million).

Hong Leong Group Cultivates Its European Tastes

IREIT’s acquisition continues a European theme set in recent years by various units of Hong Leong Group, the property-focused Singapore conglomerate which controls CDL.

Through First Sponsor, a Singapore-listed property investment firm controlled by CDL’s Millennium and Copthorne division together with Tai Tak Estates, a developer held by the family of the late UOB chief Ho Sim Guan, CDL has been acquiring properties in continental Europe for the past few years.

Just under ten months ago, First Sponsor acquired 94.9 percent of the Westin Bellevue Hotel in Dresden, Germany for €49.5 million (then $55 million), and one year before that acquisition the company led a consortium which acquired the Hilton Rotterdam hotel in the Netherlands for 50.4 million euros.

First Sponsor became one of the largest hoteliers in the Netherlands in 2017 when it acquired  Dutch hospitality group Queens Bilderberg (Nederland) for €171.4 million.