CapitaLand, Lum Chang Pick Up Frankfurt Office Complex for $293M

Singaporean developer CapitaLand has made its first bet on a commercial property in Germany, teaming up with construction firm Lum Chang to buy an office building in Frankfurt for €245 million ($293 million).

The duo is picking up the property near the Frankfurt International Airport, called Main Airport Center (MAC), through a joint venture in which CapitaLand holds a 94.9 percent stake while Lum Chang Holdings Limited owns the remaining 5.1 stake, according to an announcement by the Singapore-listed developer last week. The vendors are US alternative asset management firm Och-Ziff Capital Management Group and Germany’s Finch Properties, which acquired the building in April 2015.

The freehold property, spanning nearly 54,000 square metres of office space, is 84 percent occupied by more than 30 tenants, including the German headquarters of Dell and Mastercard and the customer loyalty operations of Lufthansa. The deal comes in the same month that a group of Singaporean firms including City Developments Limited (CDL) scooped up a historic hotel in Frankfurt, Germany’s fifth-largest city and a major European financial hub.

CapitaLand Plants Flag in German Office Market

“We are very pleased to be able to have meaningful investment exposure in a quality income-generating office building well located in Frankfurt, a top investment destination in Europe,” commented Lim Ming Yan, president and group CEO of CapitaLand Limited in a statement on the deal. “The acquisition of MAC leverages the Group’s 15 years of experience in Germany and will add to CapitaLand Group’s network of commercial buildings in Asia.”

Lim added that the company “will remain aggressive but disciplined” in pursuing a strategy of redeploying capital to higher-yielding assets and further growing its recurring income base. Beyond Asia, CapitaLand sees investment opportunities in key gateway cities in Europe, Australia and the US, according to the executive.

CapitaLand will consider enhancing Main Airport Center and expects the property to surpass 95 percent occupancy by June of this year based on leases that have already been secured. Located a 20-minute drive from Frankfort’s downtown business district, the complex is expected to benefit from the opening of a new metro station 600 metres away in 2019 and a third airport terminal in 2023.

Through the acquisition, CapitaLand Group adds to a global property portfolio totalling S$85 billion ($62.3 billion) as of last September. Southeast Asia’s largest property conglomerate has been active in the German market through Ascott Residence Trust, which is managed by the group’s Ascott serviced residence unit and owns five properties in the country with over 700 units in Berlin, Frankfurt, Hamburg, and Munich, including the 165-unit Citadines City Centre Frankfurt.

Singapore-listed Lum Chang is one of the country’s leading builders, with a portfolio of projects worth over S$9 billion ($6.8 billion).

Singaporean Investors Acquire a Taste for Frankfurt

Strong economic growth in Germany is helping to boost investor interest in the country’s commercial property sector. Europe’s biggest economy beat expectations by growing by 0.8 percent in the third quarter (2.3 percent year-on-year), while an upswing in business activity drove the highest-ever employment level at 44.3 million people in 2017.

Frankfurt has benefited as a global business hub that is home to the European Central Bank and one of Europe’s top five busiest airports. Take-up in the city’s office leasing market jumped 24 percent year-on-year in the third quarter, according to figures from brokerage Colliers International.

CDL cited Frankfurt’s appeal as an investment destination last month, when the company partnered with fellow Singapore-listed developer First Sponsor Group and privately held Singapore holding firm Tai Tak Estates to purchase the Le Méridien Frankfurt Hotel for an estimated €85.0 million ($100.1 million).

Through the deal, CDL expanded its German footprint after the group-managed CDL Hospitality Trust picked up the Pullman Hotel Munich last June for $112 million.