Allianz Real Estate has completed a €1.4 bn forward deal to buy the Frankfurt T1 project, in the largest single-asset transaction in Germany in 2021.
The acquisition of the 82,500 m2, 54-storey tower has been made on behalf of a joint venture of several Allianz group companies and pension fund BVK.
Allianz did not comment on the yield, but it is thought to be in the region of 3%. The tower is approximately two-thirds prelet to tenants including Freshfields, and completes in 2024.
The T1 tower’s developer, Gross & Partners, did not run a formal marketing process, instead holding talks with a number of parties last year. Annette Kröger, CEO of North & Central Europe at Allianz Real Estate, said Allianz’s discussions became more specific at the end of last year and terms were agreed by early this year. ‘We then brought in BVK as our partner as it is such a large deal,’ she said.
Allianz had previously teamed up with BVK in 2019 on a joint venture forward deal to acquire the EDGE East Side Tower in Berlin.
T1 is the most valuable component of the Frankfurt mixed-use project called FOUR, named after its four towers being built on a unified podium on land formerly owned and occupied by Deutsche Bank. About 8,000 m2 in T1 will be used for a food hall, convenience store, kindergarten and rooftop terraces with 74,800 m2 of office space.
The other three towers comprise residential, a hotel and further offices and the entire project, located between Junghofstrasse, Große Gallusstrasse and Neue Schlesingergasse, will total 213,000 m2.
On completion, Allianz and Gross & Partners will look to achieve Germany’s highest sustainability certification: a DGNB Platinum rating as well as classification as a ‘vertical city’. Allianz’s target is to reduce carbon emissions across its real estate portfolio by 25% by 2025 and be carbon net-zero by 2050.
Rainer Komenda, head of real estate investment at Bayerische Versorgungskammer (BVK) said: ‘As members of the Net-Zero Asset Owner Alliance and a signatory to the UN Principles for Responsible Investment, BVK is committed to making its contribution to limiting global warming to 1.5 °C. Our real estate investments, therefore, must adhere to these membership principles, which is why the opportunity to co-invest with Allianz on FOUR T1, with its focus on sustainability, held such strong appeal.’
Commitment to office sector
The T1 prelets were largely being negotiated before Covid and Kröger said that generally in the wider market there are tenants which are reconsidering their space requirements after Covid. ‘Tenants are debating how do they attract people back to the office? What we’re seeing is that people are taking a bit more time to think through these things and reassess where they stand.
‘What the interest (in T1) shows is very much in line with our view on offices generally: that assets that are very well located in the centres of cities, which are very well connected, have strong amenities with flexible layouts, that are modern, sustainable, healthy and digital ready, are exactly the sort of product that tenants are seeking.’
Allianz remains committed to its current weighting of 50% offices in its real estate portfolio, Kröger added.
She said the T1 investment also demonstrates the group’s continued commitment to Frankfurt. Allianz is currently running a sales process to sell Frankfurt’s 54,100 m2 Skyper office tower, through CBRE and BNP Paribas Real Estate.
Nicole Pötsch, head of acquisitions & sales for North & Central Europe at Allianz Real Estate, said: 'Frankfurt is one of the most influential business locations in Germany and the financial center of Europe. The city’s CBD is characterized by a low vacancy rate at 2.8% and limited office supply until 2024, and has shown tremendous resilience during the pandemic.That a number of the leases for FOUR T1 were signed during the pandemic underlines the attractiveness of the asset and its location.'
On T1, BNP Real Estate advised the buyers.
Deals pick up in Q2
The T1 sale comes as deal flow in Germany in Q2 was stronger even than in the pre-Covid boom years, led by the return of €500-mln-plus megadeals. CBRE put investment activity at €17.8 bn in Q2; Colliers recorded investment volume of €14.3 bn.
Q2 included two German deals of more than €1 bn: the €1.25 bn, 3% sale of the Berlin project FÜRST by Vivion to Aggregate, and the Mont Portfolio (69 office, retail and logistics assets), sold by Summit to Tristan’s opportunity fund Epsio 5 for approximately €1 bn.
Colliers said confidence in Europe’s recovery prospects meant Q2 had been ‘notable for a return of €500 mln-plus “megadeals” in the office sector in markets such as Germany and the UK’, of a kind that had largely gone missing in the first quarter.
‘A lot of transactions were delayed in Q1 by lockdowns,” said Richard Divall, Colliers’ director of capital markets. ‘With Europe now having vaccinated many of its most vulnerable people, restrictions are easing and we’re seeing investors coming back, with plenty of deals in the due diligence pipeline likely to close in the second half of the year.’
