BlackRock Real Assets is believed to have sold a prime Berlin office building at a record price, underlining the continuing strength of demand for German core real estate.
Swiss Life is tipped to be the buyer of Impuls, a 12,000 m2 redeveloped office at Anhalter station, close to Potsdamer Platz in Berlin-Kreuzberg. Sources said the building traded for a high multiple of between x34 and x35, a yield of about 2.7%, representing a price of circa €180 mln.
BlackRock, which declined to comment on the sale citing confidentiality, only bought the office project 18 month ago, forward-funding it from developer Reggeborgh who began it speculatively.
In February this year they let the entire space on a long-term lease to ZUG (Zukunft-Umwelt-Gesellschaft) an agency of the German federal government’s ministry for the environment and nature conservation.
BNP Paribas Real Estate advised BlackRock on the letting and the sale.
Impuls is one of several new or newly-refurbished core office buildings let on long leases to public bodies where sales are proving yield compression has continued in Germany this year - despite the Covid pandemic.
Another example is Lincoln Offices II, the latest phase of Becken’s Lincoln development in Wiesbaden in the greater Frankfurt area.
A German institutional fund manager is in exclusivity to acquire the 18,000 m2 property for about €160 mn, paying an estimated x36 multiple for the asset.
Lincoln II is under construction in what one broker described as a ‘B rather than an A location’. But it was entirely prelet on a 25-year lease last year to the State of Hesse. BNP and CBRE are advising on the sale.
Christian Kadel, head of German capital markets at Colliers International, said that pricing for such core buildings ‘has even increased this year since Covid. We are seeing rises in multiples of between 1 and 2, so about a 15-20 basis point reduction in the cap rates.’
The yield compression is driven by weight of capital and liquidity. Peter Schreppel, Frankfurt-based head of international investment at CBRE, pointed out that transaction volume by Q3 2020 for Germany was €56 bn. ‘But the more important message is that this is up 11% on the corresponding period in 2019 with Germany the only global market showing growth - that does speak for a very liquid market.’
Alexander Kropf, Berlin-based head of German capital markets at Cushman & Wakefield, said it was not untypical for his team to see twice as many bids for core assets as before the pandemic. ‘We track offers for buildings and after corona the numbers have increased. That has to lead to yield compression.’
Q4 volumes also look strong for Germany. In the offices segment, large single-asset sales which could close before the year end include: Commerz Real’s Highlight Towers in Munich where the investor hopes to realise a big gain after a four-year hold via a sale of €570 mln-plus; a circa €400 mln disposal by Lang & Cie of its 47,000 m2 Lyoner Quartier development, prelet to Deka Bank, in Frankfurt Niederrad where a German institution is in exclusivity after a Korean buyer dropped out; and Commerzbank’s sale of its Frankfurt HQ, Grand Campus, for approximately €500 mln.
According to Colliers International there is at least €15 bn of product in the market, with core accounting for more than half at €8.5 bn, and core-plus for €4.5 bn.
