The 51,000sqm office complex that served as the headquarters of Deutsche Bahn 30 years ago is being acquired by a German pension fund and will be redeveloped into modern space for multiple tenants.
The brutalist building, constructed in Frankfurt at the start of the 1990s, will be sold through an unusual leasehold agreement, which will see its current owners retain ownership of the land and receive ground rent.
The leasehold is being sold by Hesse Newman Real Estate Number 3, a closed-ended fund for retail investors that was set up to own the building 10 years ago.
Meanwhile, an occupational pension scheme that wishes to remain anonymous, will look to take advantage of Deutsche Bahn’s departure from the building to reposition it amid a wider rejuvenation of the surrounding Europaviertal district.
No financial details of the transaction were disclosed, but according to a source, the building and the land was last valued at €121m.
QUEST Investment Partners manages the Hesse Newman vehicle through its QUEST Funds subsidiary and is also managing the acquisition and asset management of the building leasehold on behalf of the unnamed pension fund.
Roland Holschuh, managing partner at QUEST Funds, said the intention was to provide the appropriate risk-return profiles for both groups of investors, “by separating the building from the ground”.
He told IPE Real Assets: “These retail funds are not usually set up… to invest in redevelopment, repositioning and to take the risk of major refurbishment and so on. It’s just not their risk profile.”
The institutional investor, meanwhile, is able to seek higher returns via the leasehold structure, which Holschuh said was “much more common in the UK than it is in Germany”. Asked how unusual the approach was, Holschuh said he was not aware of another comparable transaction in the German market.
Holschuh said the departure of Deutsche Bahn after 30 years provided “huge potential” to modernise the building and capitalise on the revival of the surrounding area, which has seen the development of new office, residential and retail real estate.
The building, now known as RAW and recently given listed status, was designed by brutalist architect Stephan Böhm at the end of the 1980s and completed in 1993. It will be converted into a multi-tenant property, with flexible commercial space, amenities and green spaces.
QUEST Funds will be looking to bring in some large tenants alongside a number of smaller ones.
“The development of the surroundings and the perception of the building has added a whole new value to [it],” Holschuh said. “It is part of a huge redevelopment scheme which has been completed.”
For 30 years, the inaccessible building used to be “a secluded Deutsche Bahn headquarters [with] a lot of security around,” Holschuh said. “And now we have the chance to open this thing.”
He added: “It’s very functional, because it’s very flexible in how you can size floor plates to different tenants… We are not intending to change the building a lot – on the contrary we just want to make it shine even more.”
QUEST Investment Partners, which was set up in 2016, and QUEST Funds, launched in 2019, is focusing on the major German cities of Frankfurt, Munich, Berlin and Hamburg.
Holschuh, who co-founded QUEST Funds subsidiary after managing international real estate portfolios at Commerz Real for six years, said: “It is very important to be local” in current market conditions, ”and that’s why we’ve really taken the decision today to focus on Germany’s four cities”.
To read the digital edition of the latest IPE Real Assets magazine click here.