ANALYSIS: German investors tighten grip on Amsterdam business district

German investors are stepping up their presence in Amsterdam’s South Axis (Zuidas) business district through a string of forward-funding and new-build deals.

Union Investment’s acquisition in early January of the new head office of Dutch law firm Stibbe in Amsterdam’s South Axis (Zuidas) business district underscores the dominance of German investors in the area.

Union paid €53.7 mln for the 14,500 m2 development, excluding the leasehold which is an important feature of the Dutch real estate market and normally included in the price. Instead, the German fund manager opted to pay an annual leasehold fee for the property, which is due for delivery in 2016. Had Union bought the leasehold, the price would have amounted to an estimated €74 mln, which equates to a gross initial yield of close to 6%.

Symphony deal
And just before Christmas, acquisitive German fund manager Deka Immobilien bought the Symphony office complex in Amsterdam from Philips pension fund for around €215.1 mln, reflecting a gross initial yield of less than 6.2%.

The deal was the biggest transaction in the Dutch market over 2013. In contrast to the Stibbe tower, Symphony is an existing building dating from 2009 and let to multiple tenants, making it less risky. The 27-storey building comprises around 34,500 m2 of space and 466 underground parking spaces and forms part of the Symphony complex which also comprises residential tower Symphony Residence and a Crown Plaza hotel.

Elsewhere in the Zuidas, Deka already owns the Rock and Vinoly office buildings, acquired in April and June 2012 at yields of around 7%. And in spring 2013, Union bought the new headquarters of coatings specialist Akzo Nobel for €82 mln, reflecting a gross initial yield of less than 6.2%.

Rising prices
The latest deals point to rising prices in the Zuidas area. In a recent interview with PropertyNL, Philip LaPierre, director of investment management for Europe at Union Investment, said Union is keen to ramp up its investments in the Netherlands, but that the focus is clearly on Amsterdam as large metropolitan areas have the biggest future potential. Amsterdam, he noted, is regarded as a core-plus, rather than core, market by the international fund manager as it has enjoyed less interest from international investors since the start of the crisis.

Other foreign - particularly German - investors share that view. German players have ploughed several hundreds of millions of euros into the Zuidas district in recent months. Besides Union and Deka, German fund manager HIH has bought the new premises of Dutch law firm Nauta Dutilh for around €65 mln.

Som and Ito
Other properties such as the Som and Ito and accountancy firm Deloitte’s new HQ, developed by OVG, are also up for sale. US firm Tishman & Speyer - operating from its European base in Frankfurt - has been named as a potential buyer for the Deloitte building, but other players are also said to be in the running.

The Zuidas deals underscore the financial muscle of the German players, reflected among other things in the fact that investors like Union are active forward funders of projects. Provided a long-term tenant is in place, forward funding does not entail excessive risk, is their view. However, the investor in question must have the requisite in-house expertise to monitor the development process and be prepared to accept a higher risk profile than with a pure turnkey project.

The German fund managers have also been active outside Amsterdam. Deka owns the Park Boulevard retail complex in Rotterdam, purchased in 2011, as well as logistics premises in Tilburg. And according to market sources, the company is also in advanced talks to buy De Rotterdam mixed-use complex in Rotterdam.

DEAL FACTFILE STIBBE TOWER
BUYER: Union Investment
VENDOR: Dura Vermeer
ASSET: Stibbe HQ (development), Amsterdam Zuidas
PRICE: €53.7 mln (excluding leasehold); €74 mln (including leasehold)
YIELD: just under 6% (based on price of €74 mln)
ADVISERS: Savills, CVO Group, Loyens & Loeff and PwC for Union Investment; CBRE, Lexence Advocaten en Notarissen and KPMG Meijburg for Dura Vermeer.

DEAL FACTFILE SYMPHONY OFFICE COMPLEX
BUYER: Deka Immobilien
VENDOR: Philips pension fund
ASSET: Symphony office complex
PRICE: €215.1 mln
YIELD: less than 6.2%
ADVISERS: Arcadis and Baker & McKenzie for Deka; CBRE, Houthoff Buruma, PwC and IPMMC (for Philips pension fund)