German, Swiss pension schemes in €500m Vienna office deal via PGIM

Three German and Swiss pension schemes are investing in a 130,000sqm office portfolio in Vienna, in what PGIM Real Estate says is likely to be one of the biggest Austrian property deals this year.

The price of the club deal completed by PGIM Real Estate — a subsidiary of US group Prudential Financial — is understood to be more than €500m.

PGIM Real Estate has signed a forward-purchase agreement for the assets with Austrian property company Signa Group.

Sebastiano Ferrante, head of Germany and Italy at PGIM Real Estate, told IPE Real Assets: “This is a particularly attractive deal for our Swiss and German clients, providing a good source of income through having a long-term lease agreement in place and a very strong covenant.

“We also liked the fact that this is a campus deal.”

The portfolio is located in a new inner-city development at Prater Stern, an established office location near the city centre and with direct transport links to Vienna International Airport.

The buildings are now under construction. On completion — which is expected in the summer of 2018 — the portfolio will comprise 130,000sqm of lettable space, within a campus mainly consisting of office buildings.

The two main office buildings will be leased on an 18-year contract to UniCredit Bank Austria, which is moving its headquarters to the new buildings. 

The third building will include a hotel operated by Roomz, a conference centre, a canteen, a kindergarten and other facilities.

The location of Vienna was also a supporting factor for the deal, according to Ferrante, who said it was a city with strong economic growth and rising employment, but also a fundamentally undervalued area for real estate, despite being the second largest German-speaking city after Berlin.

“Vienna as a market has always been somewhat overlooked, in part due to its size and low investment volumes when compared to other larger European markets,” he said.

“But moving forward, the real estate industry is starting to think about cities more as individual metropolitan areas, rather than in terms of their country of location,” he said, citing Milan as another example.

For this reason, there was value to be found in the location, Ferrante said, since international buyers from Asia, for example, were not yet ready to invest there because their focus remains on the German market. “But we see it differently,” he said.

PGIM Real Estate began discussions on the possibility of the off-market deal with the sellers a year ago, Ferrante said.