MAGAZINE: Germans tighten hold on Amsterdam offices

German investors are stepping up their presence in Amsterdam’s Zuidas (South Axis) business district through 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 Zuidas (South Axis) business district underscores the dominance of German investors in the area. Union paid €53.7 mln for the 14,500 m2 development, excluding the long-term land lease 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 land lease, the price would have amounted to an estimated €74 mln, which equates to a gross initial yield of close to 6%. And just before Christmas, acquisitive German fund manager Deka Immobiliën 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%.

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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 Vinõly 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%.

Tightening yields
The latest deals point to rising prices in the Zuidas area. In a recent interview with PropertyEU, 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 is regarded as a coreplus, rather than core market by the international fund manager, he noted, as it has enjoyed less interest from international investors since the start of the crisis. Other foreign – particularly German – investors share that view. Indeed, 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. Other properties such as the Som and Ito and accountancy firm Deloitte’s new HQ, developed by OVG, are also up for sale. 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 inhouse 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 are also 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.

TPG-Patron Dutch vehicle strikes first add-on deal
Private equity firms TPG and Patron have affirmed their continued interest in the discounted Dutch real estate market with the acquisition in late 2013 of an office portfolio for just a third of the previous acquisition price. The three offices, totalling 43,000 m2, were acquired by the pair’s Dutch vehicle Merin from the Morgan Stanley P2 Value fund. Although the company did not reveal the financial details of its latest acquisition, PropertyEU Research has established from reliable sources that the investment volume was €46.3 mln. This translates to about €1,070 per square metre. Two of the acquired buildings are leased to telecom group KPN: Röntgenlaan 75 in Zoetermeer (16,296 m2) and 159 Flight Forum in Eindhoven (11,525 m2). In Utrecht, Merin is now also the new owner of Domus Medica (Mercatorlaan 1200, 15,231 m2) which houses organisations in the healthcare sector. P2 had acquired the three assets when they were delivered in 2007 for a total of €136 mln. Domus Medica was valued at the time at €44.1 mln; the Zoetermeer office was valued at €55.3 mln and Flight Forum at €36.4 mln. This means that the current price paid by Merin is one third of the Original purchase price. The assets were valued at €110 mln on P2’s books in September 2012. TPG and Patron acquired Merin, then called Uni-Invest, in 2012 in one of the first CMBS restructurings in Europe of the present cycle. Merin is one of the largest commercial real estate companies in the Netherlands with a portfolio comprising about one million m2. Merin and its owners see further opportunities to continue to grow the portfolio over the coming years. The latest Dutch transaction – the first since 2008 – underscores Merin’s ability to source and execute significant transactions in challenging market conditions, they said. ‘Our strengths are our speed of execution, the expertise of our real estate platform and our ability to deploy a relatively large amount of equity. This year, we have already achieved significant improvements in our existing portfolio and in the Merin asset management organisation as a whole. We have recently formed an acquisition team to take advantage of the opportunities we are seeing in the market, and are very pleased to have achieved our first success already,’ said Merin CEO Bas van Holten. ING Real Estate Finance provided new financing for the acquisition and the existing lender Westdeutsche ImmobilienBank will continue to lend against one asset. Merin was advised by Stibbe, Van Doorne, Berwin Leighton Paisner and BOAG. CACEIS Bank Deutschland GmbH, the seller of the properties on behalf of the Morgan Stanley P2 Value fund, was advised by Jones Lang LaSalle, DTZ Zadelhoff and Loyens & Loeff.

by Paul Wessels