Singapore’s CapitaLand Commercial Trust (CCT) is making its first foray outside of Asia to pick up a 38-storey, grade A commercial tower in Frankfurt, Germany for €356 million ($420.8 million).
CCT, Singapore’s largest commercial REIT by market cap, will take a 94.9 percent stake in the asset, while CapitaLand, parent of CCT’s manager, will hold the remaining 5.1 percent stake through a special purpose vehicle. Built in 2003, the Gallileo building in central Frankfurt is occupied by Germany’s Commerzbank AG and provides 40,522 square metres of net lettable area.
Ranked as Southeast Asia’s largest property group, CapitaLand made its first commercial property investment in Germany less than five months ago, when it partnered with construction firm Lum Chang to buy an office building near the Frankfurt International Airport for $293 million.
CCT Now 5% Exposed to German Real Estate
The purchase of the Gallileo property will offer CCT a net property income yield of 4.0 percent, according to a statement, and will boost the trust’s portfolio value from S$10.4 billion ($7.8 billion) to S$10.9 billion ($8.1 billion) while giving the trust a five percent exposure to Germany.
“Expanding overseas is a strategic move to deliver long-term sustainable distribution growth to our unitholders and inject diversity to the portfolio,” commented Kevin Chee, chief executive of CCT’s manager in the statement. Chee add that CCT will remain focussed primarily on Singapore and will aim to allocate between 10 percent and 20 percent of its portfolio value overseas.
“We have been actively exploring opportunities to acquire core commercial assets in key gateway cities in developed markets,” he added. “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.”
Singaporean Investors Crowd into Frankfurt
Gallileo is located at Gallusanlage 7 in Frankfurt’s prime Banking District, nearby the offices of the German Central Bank and the European Central Bank as well as the Frankfurt Opera House. Banking and financial services firm Commerzbank AG occupies about 98 percent of the fully tenanted, LEED Platinum-certified building.
The freehold commercial property has ancillary retail space and a four-storey heritage building for office use. Following the acquisition, CapitaLand will have a network of 46 serviced residences and hotels in Europe, along with its pair of commercial properties in the German financial hub spanning 94,522 square metres (over one million square feet).
CapitaLand, which has a global portfolio of over S$91 billion, added nearly 54,000 square metres of office space to its European holdings when it bought Frankfurt’s Main Airport Center (MAC) last December with Lum Chang.
In the same month, Singaporean developer City Developments Limited (CDL) teamed up with First Sponsor Group and Tai Tak Estates to purchase the Le Méridien Frankfurt Hotel, a historic property near Frankfurt’s main train station for an estimated €85.0 million ($100.1 million).