EXCLUSIVE: More details on Atrium deal in Amsterdam

The acquisition of the Atrium office building in the Zuidas business district by private equity group Victory Advisors shows that bargains are possible in the Dutch capital.

Believed to be less than €100 mln, the sales price means a huge loss for financier Lloyds Bank which provided a loan of €165 mln when Quinlan Private acquired the building for around €202 mln in 2007. The vendor is believed to have been a vehicle called QP Properties, part of Avestus Capital Partners.

Market sources say the low price is a result of a combination of factors including a claim by the government on part of the parking area, the building’s high capital expenditure needs and rising vacancies as well as the new office development pipeline planned for the Zuidas (South Axis) district of the city, which is expected to put pressure on the rental values of existing buildings.

Because of confidentiality agreements and penalty clauses, both Victory Advisors and the other parties declined to comment when contacted by PropertyEU.

Financial details remain unclear, but rumours have been circulating in the market for months that the asset was set to trade for around €115 mln, but may have changed hands for €100 mln or less. The scheme - which includes a plot of land with great development potential - carries an outstanding loan of just over €200 mln.

The transaction also illustrates the growing interest in Dutch real estate on the part of foreign investors. Victory Advisors is based in Luxembourg and counts founder Erik Moresco, former managing director of the Blackstone Group, as well as Dutchman Edwin van Emmerich among its partners. Cushman & Wakefield acted for Victory Advisors on the deal while CBRE advised the vendors.

Atrium was one of the first offices in the Zuidas district and remains one of the best known assets in the area. Located on Strawinskylaan, near the World Trade Center, the complex comprises around 34,000 m2 of space with about 7,000 m2 currently available for leasing. Both Jones Lang LaSalle and Cushman & Wakefield have offices in the building.

The property changed hands several time since its delivery in 1974. In the mid 1990s, insurance group Zurich acquired it for €125 mln while Tishman Speyer bought it for €155 mln in 2004. Three years later the asset was acquired by Ireland's Quinlan Private for a reported €200 mln and is now managed by its successor Avestus Capital Partners. Avestus was established after founder Derek Quinlan left the business and moved to Switzerland.

LOW PRICING

The deal reflects a value of less than €3,000 per m2, much lower then other large transactions recently completed in the Zuidas. Earlier this year, Union Investment paid €72 mln or almost €5,500 per m2 for the newly-built headquarters of Akzo Nobel in the Dutch capital while The Rock and Vinoly were bought by Deka Immobilien in 2012 for around €4,700 per m2.

The 30,000 m2 Rock office tower was acquired from Evans Randall for just less than €133 mln or a record high gross initial yield of 7%. Viñoly, also located at Amsterdam's Zuidas, traded for €140 mln or an initial yield just under 7%.

In the case of Atrium, the sales price came under pressure largely as a result of problems with the parking facilities which according to experts represent one of the largest financial risks in the Zuidas project of bringing the highway underground.

According to development plans already in place, the existing parking garage of Atrium will be demolished in 2016 to make space for the ZuidasDok. In exchange for giving up the car park, which currently offers tenants of the building a parking ratio of 1 for every 57 employees, the owners of Atrium were promised a new parking area to be created under the main Strawinskylaan road. At a later stage however the municipality abandoned this project due to the onset of the financial crisis and the high cost involved.

The most recent solution involves the creation of an underground parking area to the west side of the building, where there is also potential to develop a new office tower. However, the central and local governments should start construction already next year in order to have the parking space ready in 2016.

Other factors contributing in making Atrium less attractive for investors, include the slightly outdated state of the asset combined with a significant – and likely growing – vacancy rate. According to CBRE, Atrium has more than 7,000 m2 of empty spaces, reflecting an occupancy rate of less than 80%. This compares to an average of a few percentage points for assets in the immediate vicinity such as the WTC, Vinoly, The Rock and RBS.

Atrium’s vacancy rate may even rise further in the future as the Zuidas is planned to see several office deliveries in the coming months. Projects already underway include the Deloitte/AKD offices with 40,000 m2 and the Akzo Nobel and Stibbe towers offering another 30,000 m2. Earlier this month developer All-in Real Estate kicked off its 2,000 m2 project at Frederick Roeskestraat, including 128 residential units, while G&S Vastgoed is due to deliver the 9,500 m2 Mahler scheme in 2015. In addition, Maarsen Groep is studying the development of project Goldstar involving the creation of up to 160,000 m2 including offices.