Madison in talks to buy Trianon tower in Frankfurt - report

US real estate investor Madison is reportedly in negotiations to acquire Morgan Stanley's P2 Value fund's stake in the Trianon office tower in Frankfurt.

According to a news report in the Financial Times Deutschland, Morgan Stanley's open-ended fund is divesting its entire 57% stake in Trianon to the American private equity firm. Morgan Stanley Eurozone Office Fund holds the remaining stake in the building.

The 70,000-m² property is believed to have a book value of EUR 471 mln, and is being sold as part of the liquidation of the P2 Value Fund. Morgan Stanley paid EUR 357 mln in 2007 for its interest in Trianon, but the stake is said to have significantly shed value over the past five years, due to the vacancy rate and the building's capex needs. In a P2 Value report issued in September, the property was valued at EUR 257 mln.

The Trianon building complex comprises six units: the 44-storey office tower, completed in 1993, at Mainzer Landstraße 16, the historic Villa Seligman at Mainzer Landstraße 18, three residential properties with 43 units at Klüberstraße 6-10 as well as a residential and a mixed-use residential/commercial building with eight flats and a restaurant at Zimmerweg 8.

Morgan Stanley Real Estate purchased the 186-metre tower at Mainzer Landstraße 16 on behalf of its Eurozone Office Fund (MSEOF) from Germany's DekaBank in 2007. The purchase price of EUR 620 mln reflected a net initial yield of 4.2%. At the time DekaBank was to continue to occupy about half of the leaseable area of Trianon - the fifth largest building in Frankfurt. Law firm Linklaters and other service providers were also among the principal tenants.

Today, there is 8.9 years unexpired on the lease, with 17% of the leaseable space vacant.