NorthStar buys Frankfurt's Trianon tower for €540m

US REIT NorthStar Realty Finance has agreed to buy the iconic Trianon office tower in Frankfurt for €540 mln, reflecting a yield of 8%.

NorthStar has signed a definite agreement to acquire the high-rise building which provides 68,600 m2 of office space and is 98.5% leased with an average lease term of around eight years.

The 186-metre-high Trianon skyscraper was put on the market in late 2014 by its US owners Madison and Morgan Stanley.

'This transaction shows there is continuous appetite from international investors for prime investment opportunities in Germany’s top five locations. The Trianon sale is the latest in a string of high profile transactions in Frankfurt over the course of the last 12 months,' said Michael Morgan, Cushman & Wakefield partner and head of investment in Frankfurt.

Cushman & Wakefield advised NorthStar in the transaction.

History
Madison bought a 56.9% stake in Trianon from Morgan Stanley's P2 Value fund in March 2012. Morgan Stanley Eurozone Office Fund held the remaining stake in the building. At the time the 47-storey office tower at Mainzer Landstraße in Frankfurt's banking district was believed to have a book value of €471 mln.

Morgan Stanley paid €620 mln for Trianon in 2007, or a net initial yield of 4.2%.

The skyscraper, completed in 1993 and featuring a roof in the form of an upside down pyramid, is considered one of the most prominent landmark buildings on the Frankfurt skyline. DekaBank and Linklaters are the two anchor tenants.

NorthStar said it is investing €250 mln of equity in the asset, which will be channelled into its new European unit, NorthStar Realty Europe, once the planned spin-off from NorthStar Realty is completed later this year. NRE will have a $2.6 bn portfolio, at cost, of European real estate investments once the latest transaction closes.

'We are extremely pleased with the addition of this iconic office tower to our fast-growing pan-European portfolio,' said NorthStar Realty's chairman and CEO David Hamamoto.

He added: 'We believe this prominent office tower will be a great addition to NRE given its strong fundamentals, including being one of a very limited number of buildings in Frankfurt with greater than 40 floors, which demand premium rents in the market.'

European debut
NorthStar has made a splash in Europe in the past few months with two major portfolio deals. In January the group inked the €450 mln acquisition of the Trias portfolio of 37 assets from German insurance company Provinzial NordWest.

PwC, which advised the vendor together with Linklaters, said the portfolio includes a total of 30 office buildings, four retail assets, two hotels as well as an industrial asset for a total 260,000 m2 of space.
The assets are located in Paris, London, Frankfurt, Berlin, Madrid, Lisbon, and Glasgow.

NorthStar entered Europe in 2014 with the purchase of a 186,000 m2 portfolio from German asset manager SEB Immobilien for around €1.1 bn.