CapitaLand REIT forays into Europe with $420m Frankfurt property acquisition

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CapitaLand Commercial Trust, Singapore’s largest commercial REIT by market cap, has agreed to acquire a 94.9 per cent stake in a freehold Grade A commercial property in Frankfurt, valued at €356.0 million, as it looks to start expanding its footprint beyond Asia.

The remaining 5.1 per cent stake in the property, meanwhile, will be held by CapitaLand, it was announced in an official statement.

The property, known as Galileo, is located in the prime Central Business District (CBD) of Frankfurt. The agreed property value of Gallileo at €356.0 million represents a discount of 1.4% to the open market value of €360.9 million.

“Expanding overseas is a strategic move to deliver long-term sustainable distribution growth to our unitholders and inject diversity to the portfolio. CCT will remain predominantly Singapore focused and will look to allocate between 10% to 20% of its deposited property overseas,” said Kevin Chee, Chief Executive Officer of the Manager of CCT.

“We have been actively exploring opportunities to acquire core assets in key gateway cities in developed markets. Germany is a key focus for CCT given the depth of good quality investment grade commercial assets. Frankfurt’s office market is particularly attractive in view of the strong momentum in office demand and resilient rents,” he added.

The Gallileo property is a freehold Grade A asset and its acquisition offers an attractive net property income yield of 4.0 per cent, the company said. The acquisition, which is expected to be completed in June 2018, will see CCT’s portfolio value increase from S$10.4 billion to S$10.9 billion with a per cent exposure to Germany, Chee added.

For CapitaLand, this deal marks the company’s second office acquisition in Germany in less than six months, following its earlier acquisition of the Main Airport Center in Frankfurt last December.

Commenting on these deals, Gerald Yong, Deputy Chief Investment Officer of CapitaLand Limited and Head of CapitaLand International, said: “In deepening our presence in one of the world’s largest and most stable economies, we will continue to deploy capital to achieve higher risk-adjusted returns. When the acquisition is completed, CapitaLand’s network in Europe will comprise 46 serviced residences and hotels, as well as two commercial properties with over 1 million square feet of net lettable area.”

The acquisition of Galileo is part of the company’s efforts to continue to grow its presence in Europe, a move which started back in 2000. Apart from office spaces, CapitaLand currently has a network of more than 5,500 serviced residence units and hotel rooms across 20 cities in seven European countries managed by its wholly-owned serviced residence arm, The Ascott Limited.

To deepen its presence in the continent, CapitaLand has set up investment and asset management offices in key European cities of Amsterdam, Frankfurt, London and Paris. In Europe, CapitaLand has a staff strength of more than 900, including professionals with legal, finance and technical expertise.