The Frankfurt-based GEG German Estate Group AG just acquired the renowned “IBC – International Business Campus” in Frankfurt am Main in an off-market transaction. The property consists of three building complexes. Located at Theodor-Heuss-Allee 70-74 and extending over a gross lettable area of 84,000 sqm, it is occupied on long-term leases, and complements the “landmark core” business line of the GEG portfolio.
The investment volume totalled approximately EUR 400 million, marking the largest single property deal in Germany so far in 2016. The property was sold by RFR Holding GmbH after the company managed to raise the market value of the IBC considerably through massive capital expenditures as well as successful lease signings and lease renewals.
Transaction financing was provided by Berlin Hyp. GEG was advised by CMS Hasche Sigle and Jebens Mensching LLP, while Clifford Chance acted as counsel for RFR.
The transaction brings the total amount invested since GEG was formed in early 2015 up to over EUR 640 million. In addition, the company has more than EUR 1 billion in property developments under management, including the schemes “MainTor” in Frankfurt, “Opera Offices” in Hamburg, and “Junges Quartier Obersendling” in Munich.
ULRICH HÖLLER, CEO OF GEG: “With the IBC, we acquired an attractive premium building of campus character in a contested market. The outstanding competitive position of the IBC will ensure a permanently high occupancy rate and stable dividend yields.”
IBC WITH SUPERIOR COMPETITIVE ADVANTAGES AND HIGH RE-LETTING POTENTIAL
The IBC is one of Frankfurt's best known office properties and is certified with LEED Gold status. The campus consists of a high-rise 112 metres tall, and another two buildings. The buildings are occupied by blue-chip tenants such as Deutsche Bank AG, Degussa Bank, Universal Investment and KfW on long-term leases, some of them recently renewed (the weighted average lease term being around 10 years). The underground car park provides 541 parking spots.
Numerous high-end features of the premium office accommodation highlight the IBC's superior competitive position. The exclusively modern fit-out standard, the excellent specification, the easy divisibility, the flexible remodelling options, and very reasonable service charges along with a broad spectrum of tenant amenities on the grounds and in the immediate vicinity all underline the superb quality of the property. The landmark building occupies a conveniently accessed location across from the Frankfurt fairgrounds. In addition to all of these perks, the outstanding competitive position of the IBC is further augmented by the intensifying shortage in large-scale objects of more than 10,000 sqm.
The IBC was designed by the architectural firm of Köhler Architekten on behalf of Deutsche Bank, and completed in 2003.
ABOUT FRANKFURT'S OFFICE MARKET
The transaction volume on Frankfurt's real estate market has steadily increased since the end of the financial crisis: The commercial investment volume in Frankfurt approximated EUR 5.7 billion in 2015, thus topping the already sound prior-year total by around 14 per cent; office properties accounted for 83 per cent of the transactions. The prime yield remained stable at 4.35 per cent. The market is targeted especially by superannuation schemes and pension funds looking for big-ticket investment opportunities, many of them hailing from abroad. However, the supply in profitable investment options is drying up fast, particularly in the core and the core-plus sectors. Indeed, it was the lack of available big-ticket asset on the markets that caused the investment volume in the first quarter of 2016 to drop below the 10-year average. While experts assume that demand will remain as high as ever in the coming years, they also believe that the strain on supply will persist. Meanwhile, Frankfurt's occupier market has shown very brisk momentum: The office take-up during Q1 2016 added up to 130,900 sqm, exceeding the 5- and 10-year average by more than a third. The fact is matched by corresponding rental growth: Both the prime rent and the upper end of the rent bracket in several sub-markets went up, as did the weighted average rent.
ABOUT RFR HOLDING
RFR Holding GmbH (RFR) is a member company of RFR Group owned by the German-born real estate investors Michael Fuchs and Aby Rosen. Today, RFR Group holds real estate assets worth approximately USD 10 billion worldwide. The RFR portfolio includes the Upper West, WestendGate, the Seagram Building, Lever House, among other buildings.