UPDATE: CapitaLand Commercial Trust enters deal to buy most of Frankfurt’s Main Airport Center

Euro coinsPhoto by Leslie Shaffer

This article was originally published on Wednesday, 17 July 2019 at 8:43 A.M. SGT; it has since been updated with more details.

CapitaLand Commercial Trust entered a deal to acquire 94.9 percent of Main Airport Center (MAC) in Frankfurt from CapitaLand and Lum Chang Holdings for 251.5 million euros, or around S$387.1 million, the trust said in a filing to SGX Wednesday.

“We are scaling up in a familiar and resilient market with strong property market fundamentals,” Kevin Chee, CEO of CapitaLand Commercial Trust Management Ltd., the trust’s manager, said in the statement.

“Frankfurt’s office vacancy rate has seen a steady decline over the years. Average office rents in the city have risen steadily in recent years and
are expected to continue their upward trajectory in the coming years in light of low vacancy rates,” Chee added.

Chee said the acquisition offered a net property income yield of 4.0 percent.

CapitaLand Commercial Trust’s move is its second acquisition in Frankfurt, in a deal which increases its overseas exposure to 8 percent of the portfolio’s property value, up from 5 percent previously, the filing said.

The acquisition is expected to be accretive to distribution per unit by around 1.0 percent to 2.5 percent, on a pro forma basis, the trust said.

The deal will be funded entirely with euro debt facilities or a combination of equity and euro debt facilities, the trust said.

MAC, which is a multi-tenanted office building, is located near Frankfurt Airport and is an around 20-minute drive to Frankfurt’s central business district, the filing said.

The building, which has 11 storeys and two basement levels, offers around 60,200 square meters of total net lettable area, with around 53,900 square meters of that high-specification office space, while the remainder contains a conference hall, meeting rooms and 1,510 car park lots, the trust said.

The building’s occupancy was around 90 percent as of end-June, the filing said, while the vacancy rate of the Frankurt airport office submarket was at a 10-year low of around 4 percent, below the city’s overall office vacancy rate of 7.5 percent.

“The manager believes that there is potential to increase the occupancy rate through active leasing efforts which would allow CCT to benefit from further rental income upside,” the trust added.

CapitaLand will continue to hold a 5.1 percent interest after the deal’s close, the filing said.

In a separate filing, CapitaLand said the divestment was part of its strategy to recycle its assets and added that including the MAC deal, it has announced divestments of around S$3.46 billion so far this year, exceeding its annual target of at least S$3 billion.

“The proposed transaction is another demonstration of CapitaLand’s ability to offer quality pipeline assets to oursponsored REITs and funds,” Lee Chee Koon, group CEO of CapitaLand, said in the statement.

“Post transaction, CapitaLand will continue to benefit from MAC’s steady yield and participate in its future growth through our direct holding as well as CapitaLand’s stake in CCT,” Lee added.

 

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