Dream Global is expanding its German portfolio with the acquisition of a fully-let office building in Stuttgart.
The investment volume of €92 mln for the Bollwerk office building reflects a going-in capitalisation rate of 5.3%, according to a statement from Dream Global, a Canadian REIT focused purely on European real estate.
Similar but not identical to a net initial yield, a going-in cap rate for an existing property is the net operating income from the last 12 months at the point of acquisition, divided by the purchase price.
The deal, Dream Global said, will be financed from the proceeds of the company's €76 mln capital raising in March and a new €55.2 mln mortgage for 10 years at a fixed interest rate of 1.7%. The acquisition is expected to close in early July.
Located in central Stugttgart, the 28,428 m2 Bollwerk consists of four multi-storey wings that surround a main courtyard. The building's main tenants, comprising 94% of the gross leasable area (GLA), are five separate and distinct subsidiaries of LBBW, Germany's largest state-backed Landesbank. The tenants have staggered lease maturities, with an average unexpired term of 4.9 years.
The Bollwerk deal comes less than a month after Dream Global acquired the Airport Plaza office building, next to Brussels Airport, for €96 mln. The proceeds of the March equity offering have now been fully deployed across the two transactions, to acquire €188 mln of real estate at a weighed average cap rate of 6.2%.
German expansion
Bollwerk also increases Dream Global's exposure to the Big-7 office markets in Germany. Together with its existing assets, which include Z-Up, OasisIII and Officivm, the REIT will own 72,000 m2 of GLA in Stuttgart or 6% of the total portfolio in GLA.
At 3.4%, the vacancy rate in Stuttgart is the lowest amongst all major office markets in Germany and has declined 90 basis points year-over-year. The new supply pipeline remains low and prime rents have increased 7.5% in the past year.
Jane Gavan, CEO of Dream Global, said Stuttgart's office market had one of the lowest vacancy rates in the world. 'With this acquisition, we have increased our presence in not only one of our favourite markets in Germany, but one of the best office markets globally.'
Dream Global's owns almost 1.3 million m2 of gross leasable area of office, industrial and mixed-use properties across Germany, Austria and Belgium. The portfolio was valued at €2 bn in May this year.
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Photo: Bollwork by Barbara Staubach
