Q3 DEALS: Foreign capital makes play for largest German assets

Foreign and heavyweight domestic investors have sent German real estate volumes rocketing to €38 bn in the first nine months of 2015 as they competed to secure the largest office and retail opportunities Continental Europe's largest market has to offer.

TOP GERMAN DEALS
First 9 months of 2015

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1. Deutsche Annington starts trading as Vonovia
2. Canada's HBC, US Simon take over Galeria Kaufhof real estate for €2.4b
3. ANALYSIS: Patrizia seals mega resi sale as international expansion intensifies
4. Deka snaps up huge German retail portfolio for €700m
5. Orion seals €600m German office deal with financing from Helaba
6. US REIT NorthStar closes €540m Frankfurt Trianon tower deal
7. IVG acquires ECB tower in Frankfurt for €480m
8. Korean consortium snaps up IVG's 'Silver Tower' in Frankfurt
9. Pramerica and Gingko seal massive Siemens Campus deal

SOURCE: PROPERTYEU RESEARCH

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The contest has been particularly acute in the office sector, which accounted for the majority of spend in the last three quarters (41%). Based on the deal data compiled by PropertyEU Research, cross-border players got the upper hand in relation to the biggest tickets, as they accounted for 65% of the €4.7 bn volume for the 20 largest transactions.

The largest office deal so far this year came in the second quarter when Orion Capital Partners sealed the much-anticipated €600 mln acquisition of the Odin office portfolio in Germany. The London-based European private equity firm received €347 mln financing from German bank Helaba for the 20-asset portfolio. Credit Suisse sold the Odin assets as part of the liquidation of its open-ended funds, the €3.2 bn CS Euroreal and the smaller CS Property Dynamic.

Aref Lahham, managing director and a founding partner of Orion, said: 'Orion assessed the quality of the portfolio to be superior compared to other German office portfolios that are currently being marketed. Many of the assets are located in the big seven cities and the portfolio is anchored by strong credit tenants. Orion’s business plan is to drive rental income by investing in the premises in order to increase occupancy levels and further institutionalise the assets.'

Frankfurt
Towers were also much in demand, particularly in Frankfurt, Europe's financial hub. At the beginning of the year, Korean asset management Samsung led the consortium acquisition of Silberturm, or Silver Tower, in Frankfurt from IVG Institutional Funds for an estimated €480 mln.

Seven months later US REIT NorthStar acquired the Trianon office tower in the city for €540 mln, reflecting a yield of 8%. 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,' Michael Morgan of Cushman & Wakefield said at the time.

Trianon was sold by was Triuva, formerly IVG Institutional Funds. The company, which is based in Frankfurt, was on the other side of the ledger in when it bough Eurotower, home of the European Central Bank in Frankfurt, for €480 mln from US private equity real estate firm RFR.

Retail
Foreign investors played a major role in the retail property sector which, according to BNP Paribas, saw a record volume of €14 bn from January to end-September. The largest transaction was carried out by a North American joint venture.

Hudson's Bay Company (HBC), one of North America’s oldest firms, agreed in June to buy Germany’s 135-year old Galeria Kaufhof department store chain and its Belgian unit Immo in a deal valued at over €2.8 bn, including debt.

HBC, a major retail business in North America and the operator of Saks Fifth Avenue, said it would finance the acquisition through the sale of at least 40 of Kaufhof’s owned or partially owned properties to its US real estate joint venture with Simon Property Group, Simon-HBC JV, for at least €2.4 bn.

Other major cross-border deals included Klépierre acquiring five shopping centres for €1 bn, as part of its takeover of Dutch peer Corio, and Canada Pension Plan Investment Board (CPPIB) taking a 46% indirect stake in German shopping centre developer-manager Mfi. Unibail-Rodamco owns the rest of the business.

Fund manager Deka Immobilien clinched the largest domestic deal when it acquired 51 retail assets in 37 German cities from Amsterdam-based D&R Invest for €700 mln.