Capitaland acquires Frankfurt commercial property for €342.7 million

Singapore-based Capitaland Commercial Trust (CCT) will be offering a whopping 342.7 million euros (S$548.3 million) in its bid to buy the majority stake of a freehold commercial property cited in Frankfurt, Germany.

The purchase is believed, will be partially bankrolled by CCT’s equity placement which valued at circa $212 million.

The Trust will be sharing the acquisition of the property with CapitaLand. Gallileo, as the property is popularly called, is located in the central business district (CBD) of Frankfurt, Germany.

While the Asian firm will be holding as much as 94.9 per cent stake in the property, its co-owners CapitaLand will have the remaining 5.1 per cent. Negotiations are near completion and the deal is expected to be closed before the end of June 2018.

A market value appraisal carried out by Cushman & Wakefield LLP in March put the open market value of Gallileo at 360.9 million euros, a figure that edges the property’s agreed value of 356 million euros, a value that represents a paltry 1.4 percent discount to the open market value.

Essentially, about $208.7 million, which represents 98.4 per cent of the gross proceeds will be utilized to partially fund the acquisition of Gallileo property, while the rest, which is represented by 1.6 per cent, will be expended on cost relating to private placement and working capital in view of the acquisition.

Gallileo is situated in the heart of Frankfurt's prime banking district, covering a large area approximating to 436,175 sq ft (40,522 sqm), which can be let out. The property is a 38-storey Grade A commercial building, with an ancillary that houses a four-storey heritage building that contains large office spaces.

On the average estimate, the lease expiry is put at 10 years and six months and occupancy of each room or office stands at 100 per cent.

CCT management is quite optimistic that the potential acquisition of the German property will not distract their interest and intention away from deliberately making Singapore their huge investment hub. However, this acquisition is rather seen as a strategy for business expansion and opportunity creation into Europe market, particularly German.

The idea of breaking into European business environment does not only fit into their long-term strategic business plan, but will also hugely develop their relationship and trust overseas. Hence, acquisition of Gallileo and the CCT’s plan of distribution per unit (DPU) will pave way for a large room for geographical diversification.

CCT is resolved to commit between 15 to 20 per cent of its funds to investment overseas while focusing on the growth of Singaporean business and economy. Kevin Chee, CCT’s CEO expects that this kind of joint venture with Capitaland will open new areas for exportation of their expertise and creation platform to deepen their network and presence in Germany.

Besides, the post-acquisition experience in the words of Chee, will expand and increase CCT's portfolio value from the current $10.4 billion to $10.9 billion, and that bring about a 5 per cent exposure to Germany’s business opportunities.

CapitaLand, CCT’s co-shareholder, has prospects in the venture, according to Gerald Yong who currently serves as deputy chief investment officer and head of CapitaLand International.

The deal represents CapitaLand's second acquisition in Germany in less than six months, after the previous acquisition of the Main Airport Center in Frankfurt last December.